US Stocks Down Again Early Friday

NEW YORK (AP) -- Wall Street is limping Friday toward the close of what could be its worst week since March.

The S&P 500 was 0.4% lower in early trading and on track for a third straight losing week. The Dow Jones Industrial Average was down 80 points, or 0.2%, at 34,393, as of 9:45 a.m. Eastern time, and the Nasdaq composite was 1% lower.

Stocks fell even as yields eased a bit in the bond market. A swift rise in yields has forced investors to reassess whether stocks have grown too expensive, particularly after their prices ripped higher through the first seven months of this year.

After topping 4.30% a day before and nearing its highest level since 2007, the 10-year Treasury yield fell back to 4.25%.

Other markets around the world also sank, as higher yields globally crank up the pressure on stocks. Higher yields mean bonds are paying out more in interest, but they also make investors less willing to pay high prices for stocks and other investments that are less stable than bonds.

The narrative in the stock market may be poised to flip from "buy the dip" during the first half of the year, when traders saw moments of weakness as opportunities to buy low, to "sell the rip" in the second half of the year, according to Bank of America investment strategist Michael Hartnett.

In a BofA Global Research report, he pointed specifically to how the trend may follow Microsoft, one of the big seven tech-oriented stocks responsible for the majority of the S&P 500's gains earlier this year.

The group called the "Magnificent Seven" has been under particularly heavy pressure recently because technology and other high-growth stocks are seen as some of the biggest losers of higher rates. Several of them, including Microsoft, are down more than 10% from their highs earlier this year.

Microsoft fell 1.1% and was one of the heaviest weights on the S&P 500 Friday. Meta Platforms dropped 2.6%, and Nvidia sank 2.5%.

Yields are on the march in part because a string of data has shown the U.S. economy remains resilient. While that suggests the economy may avoid a long-predicted recession, it also forces up expectations that the Federal Reserve may keep its main interest rate higher for longer.

The Fed last month hiked the overnight interest rate it controls to the highest level since 2002, as it tries to fully smother high inflation. High rates work by slowing the economy bluntly, raising the risk of a recession, and hurting prices for investments.

Traders had been hoping that the Fed was done hiking rates and that it would begin cutting them early next year. Inflation has already come down considerably since its peak last summer.

But economists say the last bit to get inflation down to the Fed's target may prove the most difficult. And a suite of strong reports on the economy, including much stronger sales at U.S. retailers than expected, suggest upward pressure still exists on inflation. Traders have since ratcheted back their expectations for rate cuts through the end of 2024, according to data from CME Group.

The next big event for markets could be Fed Chair Jerome Powell's speech late next week at an event at Jackson Hole, Wyoming.

Higher yields make the stock market look more expensive, unless companies suddenly earn much more in profits. And while companies have been reporting stronger earnings for the spring than analysts expected, it hasn't been enough to stop the market's slide.

Ross Stores jumped 5.6% for the largest gain in the S&P 500 after it reported stronger results for the latest quarter than Wall Street had forecast.

Applied Materials also reported stronger profit than expected, but its stock rose a more modest 0.9%.

In markets abroad, stocks slid across Europe and Asia.

Worries have been high about China, whose economic recovery since removing anti-COVID restrictions has faltered. Property developers in the world's second-largest economy are under particularly heavy scrutiny.

Evergrande Group, a giant real-estate developer, is asking a U.S. court to approve a restructuring plan for foreign bondholders as it tries to avoid defaulting on $340 billion in debt.

Stocks in Hong Kong tumbled 2.1%, and the Hang Seng index is already down 10.6% in August alone.