NEW YORK — Wall Street closed another bumpy week with a mixed performance on Friday amid worries that inflation is not cooling as quickly or as smoothly as hoped.
The S&P fell 0.3% after paring a bigger loss from the morning. The Dow Jones Industrial Average rose 129 points, or 0.4%, after coming back from an early loss of 179 points, while the Nasdaq composite fell 0.6%.
Stocks have hit turbulence in February after shooting higher in January with hopes that cooling inflation could get the Federal Reserve to take it easier on interest rates and that the economy could avoid a severe recession.
Reports recently have shown more strength than expected in everything from the job market to retail sales to inflation itself.
That’s forced a sharp recalibration on Wall Street as investors move their forecasts for rates closer to the “higher for longer” stance that the Federal Reserve has long been espousing. The hope is that high rates can drive down inflation, but they also hurt investment prices.
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Economists at Goldman Sachs added one more hike by the Fed in June to their forecast, meaning they see its key short-term rate ultimately rising to a range of 5.25% to 5.50%. That rate was at virtually zero a year ago, and it hasn’t topped 5.25% since the dot-com bubble deflated in 2001. It’s currently at a range of 4.50% to 4.75%.
The fear is that if inflation proves stickier than expected, it could push the Fed to get even more aggressive than it’s prepared the market for. Such movements have been most clear in the bond market, where yields soared this month on expectations for a firmer Fed.
The two-year Treasury yield topped 4.70% in the morning, up from 4.62% late Thursday and from less than 4.10% earlier this month. It later pulled back to 4.61%. It has recently approached its heights from November, when it reached its highest point since 2007.
Still offering some support to the stock market are remaining hopes among investors that the economy can avoid a worst-case recession.
Jobs are still plentiful, and shoppers are still spending to prop up the most important part of the economy, consumer spending. That’s helped the S&P 500 index hold onto a gain of 6.2% since the start of the year.
In stock markets abroad, Hong Kong’s Hang Seng lost 1.3%. Losses were amplified by news that a major tech industry dealmaker, Bao Fan, apparently went missing.
Shares in one of China’s top investment banks, China Renaissance, plunged Friday after the company said in a filing to Hong Kong’s stock exchange that it had lost touch with Bao, its founder. Bao’s disappearance follows a crackdown on technology companies in the past two years that officials in China said had been wrapped up.
Stocks also mostly fell across Asian and European markets.