NEW YORK (AP) — A choppy trading day on Wall Street ended with a modest pullback for stocks on Wednesday, the latest bout of volatility for the market amid concerns about inflation and uncertainty about whether rising interest rates will help or hurt the economy.
The indices were on pace for a modest gain before slipping into the red in the closing minutes of trading. The S&P 500 fell 0.1% as stocks in the benchmark were roughly evenly split between winners and decliners. The Dow Jones Industrial Average fell 0.2% and the Nasdaq fell 0.1%.
Energy companies helped drive the market lower after the price of US crude oil fell 4%. Tech companies also lost ground, which helped contain gains in health care, real estate and other sectors.
Investors have been closely following testimony in Congress by Federal Reserve Chairman Jerome Powell. He reaffirmed the will of the central bank willingness to raise interest rates and slow inflation.
The choppy trading followed a strong rally on Tuesday in what was a turbulent time for the broader market, with daily and sometimes hourly swings from big gains to losses. The benchmark S&P 500 is currently in a bear market, meaning it has fallen more than 20% from its most recent peak, which was in January. It has also fallen in 10 of the past 11 weeks, but holds its gains so far for this week.
Much of the market decline was linked to concerns about rising inflation and the Federal Reserve’s plan to aggressively raise interest rates to temper the impact of inflation on consumers and businesses.
“New hurdles have sprung up before us,” said Sylvia Jablonski, chief investment officer at Defiance ETFs. As a result, she said, many investors are “sitting on the sidelines.”
The S&P 500 fell 4.90 points to 3,759.89. The index bounced between a 1% gain and a 1.3% loss throughout the day.
The Dow Jones lost 47.12 points to 30,483.13, while the tech-heavy Nasdaq slipped 16.22 points to 11,053.08.
Stocks of smaller companies also fell slightly. The Russell 2000 Index slid 3.75 points, or 0.2%, to 1,690.28.
Bond yields have mostly fallen. The yield on the 10-year Treasury note, which helps set mortgage rates, fell to 3.16% from 3.30% on Tuesday evening. Markets in Europe and Asia also fell.
On Wednesday, Powell underscored the Fed’s determination to raise interest rates high enough to slow inflation, a commitment that stoked fears that the central bank’s fight against soaring prices could tip the economy in the recession. Powell addresses Congress this week, beginning with the Senate Banking Committee on Wednesday.
“We’re not trying to cause and don’t think we’ll need to cause a recession,” Powell said. “But we think it’s absolutely essential that we restore price stability, really for the benefit of the labor market as much as anything else.
Powell’s testimony came a week after the Fed raised its benchmark interest rate by three-quarters of a percentage point, its biggest hike in nearly three decades. With inflation worsening, Fed policymakers are also forecasting a faster pace of rate hikes this year and next than they expected three months ago, with its key rate hitting 3 .8% by the end of 2023. This would be its highest level in 15 years. .
The Fed’s moves come as some discouraging signals have emerged about the economy, including lower spending at retailers and gloomy consumer sentiment. Inflation and interest rate concerns were heightened by soaring prices for energy and other key commodities following Russia’s invasion of Ukraine.
Record gasoline prices have taken a bigger slice of consumers’ wallets and slowed spending elsewhere. This prompted President Joe Biden to ask Congress to suspend federal gasoline and diesel taxes for three months, a move intended to ease financial pressures at the pump.
Inflation hit its highest level in four decades in the United States and prompted businesses to raise prices for everything from food to clothing. Consumer spending remained strong for most of the pandemic, but fell amid stronger inflationary pressure. Inflation hits record highs worldwide. British inflation hit a 40-year high of 9.1% in the 12 months to May.
Wall Street remains concerned about aggressive Fed policy raising the risk of a recession, but Powell said another risk involves high inflation taking root in the economy if the central bank fails to take appropriate action. .
“We cannot fail in this task,” he said. “We need to get back to 2% inflation.”
AP Business Writer Stan Choe contributed. Veiga reported from Los Angeles.
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