Wall Street stocks fell Thursday morning, contributing to weekly losses in major indices as central banks around the world hiked interest rates to fight inflation.
The S&P 500 was down 0.6% as of 10:19 am ET. The Dow Jones Industrial Average fell 98 points, or 0.3%, to 30,086 and the Nasdaq fell 1%. Every major index is headed for weekly losses.
Losses were large, led by retail traders, technology stocks and industrial stocks. Starbucks fell 3.4% and Apple fell 1.2%. Energy stocks gained ground as US oil prices surged 3.4%. Valero Energy rose 1.4%.
Bond yields rose. The yield on the 2-year Treasury bond, which is trending in line with expectations for Fed action, rose sharply to 4.12% from 4.02% late Wednesday. It is trading at its highest level since 2007. The 10-year Treasury yield, which affects mortgage rates, rose to 3.65% from 3.51% on Wednesday.
Central banks in Europe and Asia hiked rates a day after the Federal Reserve announced another large rate hike and signaled more to come.
The British central bank increased interest rates by another half percent. The Swiss central bank raised its benchmark interest rate by 0.75 percentage point, the highest ever, and said it could not rule out further hikes. The central banks in Norway and the Philippines also raised interest rates.
The Fed and other central banks are raising interest rates to make borrowing more expensive. The goal is to slow economic growth enough to tame inflation, but not so much that economies slide into recession. Wall Street fears the Fed may apply the brakes too hard in an already slowing economy, increasing the likelihood of a recession.
On Wednesday, Fed Chair Jerome Powell reiterated his determination to raise interest rates high enough to push inflation back towards the central bank’s 2% target. Powell said that with this latest rate hike, the Fed is just beginning to get to that level. The US Federal Reserve increased interest rates, which cover many consumer and business loans, to a range of 3% to 3.25%. This is the fifth rate hike this year and from zero at the start of the year.
The Fed also released a forecast known as a “scatter chart” showing that its policy rate will come in at 4.4% by the end of the year, a full point higher than the June forecast.
AP business writers Joe McDonald and Matt Ott contributed to this report.
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