Stocks climb on Wall Street at the end of a brutal week

NEW YORK >> Stocks edged higher in afternoon trading on Wall Street today at the end of a brutal week.

The S&P 500 was up 0.7% at 1:15 p.m. ET. The Dow Jones Industrial Average rose 126 points, or 0.4%, to 30,053 and the Nasdaq rose 2%.

Every major index is on course for weekly losses after suffering several steep declines this week as investors adjust to the bitter medicine of higher interest rates that the Federal Reserve and other central banks are using in their fight against inflation. Higher rates fight inflation, but they also slow the economy and can lower stock and bond prices.

“Any lack of clarity or confidence in the Federal Reserve is going to create a lot of volatility in the market,” said Megan Horneman, chief investment officer at Verdence Capital Advisors.

The benchmark S&P 500 is down more than 5% for the week. Worries over inflation, rising interest rates and a risk of recession sent it into a bear market earlier this week, meaning it had fallen more than 20% from its peak . It is now around 23% below its record set at the start of this year and back to where it was at the end of 2020. This effectively wipes out 2021, which has been one of the best years for Wall Street since the start of the millennium. .

Investors’ primary concern is whether aggressive interest rate hikes by the Federal Reserve and other central banks around the world will temper record inflation without pushing the United States and other economies into recession.

“There’s a lot of uncertainty right now about the timing of a recession, but the risks are clearly increasing,” Horneman said.

On Wednesday, the Fed raised its main short-term interest rate by three-quarters of a percentage point, triple the usual move. It may consider another similarly large increase at its next meeting in July. At the same time, the central bank is allowing some of the trillions of dollars of bonds it bought during the pandemic to come off its balance sheet. This should put upward pressure on long-term interest rates. This is another way central banks have ripped off the supports they previously propped up under the markets to stimulate the economy.

The Fed’s effort to slow the US economy is occurring at the same time as some other measures of economic growth, such as retail sales, are slowing. This has raised concerns that the Fed’s actions may be too aggressive.

Investors will have a chance next week to take the measure of Fed thinking again when Chairman Jerome Powell testifies before Congress. Testimony is scheduled for Wednesday and Thursday.

Technology companies have increased. Apple rose 2.1%. Healthcare companies, retailers and banks also made gains. Energy companies fell as US crude oil prices fell 6.4%. Exxon Mobil fell 4.8%.

Bond yields eased. The 10-year Treasury yield fell to 3.21% from 3.30% on Thursday evening.

US markets will be closed on Monday for the June 16 holiday.

Garland K. Long