Stocks steady themselves after Wall Street's rout last week

NEW YORK — Stocks steadied themselves Monday following Wall Street’s worst week since early December.

The S&P 500 rose 12.20 points, or 0.3% to 3,982.24 for just its second gain in the last seven days. The Dow Jones Industrial Average gained 72.17, or 0.2%, to 32,889.09, while the Nasdaq composite climbed 72.04, or 0.6%, to 11,466.98.

Stocks struggled in February after a strong start to the year as reports have shown inflation and much of the overall economy are staying more resilient than expected. While the strong economic data calms fears that a recession may be imminent, it also forced Wall Street to raise its forecasts for how high the Federal Reserve will take interest rates and how long it will keep them there.

High rates can drive down inflation, but they also raise the risk of a recession in the future because they slow the economy. They also hurt prices for stocks and other investments.

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The heightened expectations for rates have been most evident in the bond market, where yields shot higher in recent weeks. On Monday, the yield on the 10-year Treasury slunk back a bit, which eased some of the pressure on stocks.

The 10-year Treasury yield dipped to 3.92% from 3.95% late Friday. That yield helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, slipped to 4.79% from 4.81%. It’s near its highest level since 2007.

Yields eased after a report showed that orders for machinery, aircraft and other long-lasting manufactured goods fell by more than economists expected in January.

Economists have been expecting more softness in the economy after the Fed jacked up rates last year at the fastest pace in decades. But reports on everything from the job market to spending by consumers to inflation itself have been coming in firmer than expected over the last few weeks.

The fear is that if the economy stays on strong footing, it could feed into upward pressure on inflation. That’s why expectations on Wall Street have swung so hard, from earlier thinking the Fed could soon take it easier on interest rates to now believing it could raise them above 5.25%.

The Fed’s key overnight rate is now in a range of 4.50% to 4.75%, up from virtually zero at the start of last year.

Even Monday’s weaker-than-expected report on durable goods had some underlying strength. After ignoring transportation-related equipment, orders jumped last month to the biggest gain since March. It was much stronger than the drop that economists expected to see.