Wall Street wheezed to more losses on Friday as it limped to the end of its worst week in six months.
The S&P 500 slipped 9.94 points, or 0.2%, to 4,320.06 after a late-day swoon erased a modest gain it had held for most of the day. It capped an ugly slide caused by Wall Street’s growing understanding that interest rates likely will not come down much any time soon.
The Dow Jones Industrial Average fell 106.58 points, or 0.3%, to 33,963.84, and the Nasdaq composite dipped 12.18, or 0.1%, to 13,211.81.
Pressure has built on Wall Street as yields in the bond market climbed to their highest levels in more than a decade.
They had been rising for months and accelerated this week after the Federal Reserve indicated it is unlikely to cut its main interest rate by as much in 2024 as investors had hoped. The federal funds rate is at its highest level since 2001, which grinds down on investment prices as it undercuts high inflation.
Yields eased a bit on Friday, which helped the S&P 500 stabilise somewhat following its 1.6% drop a day before, which was its worst since March. The yield on the 10-year Treasury fell to 4.44% from 4.50% late on Thursday.
The two-year Treasury yield, which moves more closely with expectations for the Fed, dipped to 5.10% from 5.15%.
When bonds are paying more in interest, investors are less willing to pay high prices for stocks. High rates hit particularly hard on stocks seen as the most expensive or forcing investors to wait the longest for big growth in the future.
Recently, that has meant particular pain for big technology stocks. Nvidia trimmed its loss for the week to 5.2% after rising 1.4% on Friday. The Nasdaq composite, which is full of tech and other high-growth stocks, slumped 3.6% for its worst week since March.
Shares of automakers were mixed after the United Autoworkers said it will expand its strike by walking out of 38 General Motors and Stellantis plants in 20 states. The union did not broaden its limited strike against Ford, which it said has met some of the union’s demands in talks this week.
Ford rose 1.9%, General Motors fell 0.4%, and Stellantis rose 0.1%.
Auto workers are looking for raises in pay and other benefits, and a prolonged strike could put upward pressure on inflation if shortages send prices higher.
The strikes are just one among a long list of challenges looming over the economy, including a possible US government shutdown, the upcoming resumption of student-loan repayments and shaky economies around the world.
Hanging above them all is the realisation sinking in on Wall Street that interest rates may be staying higher for longer.
The Fed indicated on Wednesday it may raise its main interest rate one more time this year.
High rates drag down inflation by intentionally slowing the economy and denting prices for investments. They also take a notoriously long time to take full effect and can cause damage in unexpected, far-ranging corners of the economy. Earlier this year, high rates helped lead to three high-profile collapses of US banks.
By Stan Choe, Associated Press