NEW YORK (AP) — Stocks fell again on Thursday, deepening Wall Street’s losses for the week, as central banks around the world raised interest rates to fight inflation.
The S&P 500 fell 0.8%, its third consecutive decline. The benchmark is down about 3% so far this week.
The Dow Jones Industrial Average fell 0.4% and the Nasdaq composite lost 1.4%. The Russell 2000 index of small company stocks fell 2.3%, a sign that investors are worried about the economy. The major indices are on track for their fifth weekly loss in six weeks.
Bond yields mostly rose. The 2-year Treasury yield, which tends to track Federal Reserve action expectations, rose significantly to 4.11% from 4.02% late Wednesday. It is trading at its highest level since 2007. The 10-year Treasury yield, which influences mortgage rates, jumped to 3.70% from 3.51% on Wednesday evening.
The latest wave of selling reflects investor concerns that the Fed may need to get more aggressive than it has signaled to finally get inflation under control, said Barry Bannister, chief equity strategist at Stifel. This scenario is unlikely if prices stabilize and fall, but it could take more than a year for this process to unfold, he said.
“The question is what level of patience does the Fed and the market have?” he said.
Central banks in Europe and Asia raised interest rates a day after the Federal Reserve made another big rate hike and signaled more were on the way.
The British central bank raised its key rate by another half a percentage point. The Swiss central bank raised its benchmark lending rate by its largest margin yet, 0.75 percentage points, and said it could not rule out further hikes. The central banks of Norway and the Philippines also raised interest rates.
The Fed and other central banks raise interest rates to make borrowing more expensive. The goal is to slow economic growth enough to bring inflation under control, but not so much that economies slide into recession. Wall Street fears the Fed is putting the brakes on an already slowing economy too hard, making a slide into a recession more likely.
On Wednesday, Fed Chairman Jerome Powell underscored his determination to raise rates high enough to bring inflation back toward the central bank’s 2% target. Powell said the Fed had just started to hit that level with this most recent increase. The US central bank raised its benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%. This is the fifth rate hike this year and zero at the start of the year.
The Fed also released a forecast known as the “dot plot” that showed it expects its benchmark rate to be 4.4% by the end of the year, a point of more than expected in June.
“There aren’t a lot of easy answers when you have the most powerful entity in the world, the Federal Reserve, on this path of higher rates,” said Michael Antonelli, market strategist at Baird. “He just has people jostling each other.”
The S&P 500 fell 31.94 points to 3,757.99 on Thursday. The index is now at its lowest level since mid-June and down more than 21% since the start of the year.
The Dow lost 107.10 points to close at 30,076.68, while the Nasdaq ended down 153.39 points at 11,066.81. The Russell slipped 39.85 points to 1,722.31.
Losses were large and concentrated in retailers and technology, financial and industrial stocks. Starbucks fell 4.4%, Nvidia 5.3%, American Express 3.8% and UPS 3.4%.
Healthcare stocks were among the few bright spots. Johnson & Johnson rose 1.8%.
The companies are closing in on the end of the third quarter and gearing up for the next big round of earnings reports, although some early reports have been released. Homebuilder Lennar rose 2% after reporting strong financial results for its fiscal third quarter. Homebuilder KB Home fell 5.1% after a warning about supply chain issues and a mixed financial report.
AP Business Writers Joe McDonald and Matt Ott contributed to this report.
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