NEW YORK (AP) – The S&P 500 ended barely changed on Thursday after stocks hovered in mixed trading, as investors brace for a future where the Federal Reserve is no longer doing all it can to keep interest rates very low.
Markets around the world have been mixed but mostly calm after investors in Asia and Europe had their first chance to respond to the crisis. Federal Reserve Report Wednesday that it could start raising short-term interest rates by the end of 2023. The Fed chairman also said that it had started discussing the possibility of slowing its buying program. obligations. Such support has been one of the main reasons for the stock market’s resurgence to record highs, with the most recent coming on Monday.
The S&P 500 slipped 1.84 points, or less than 0.1%, to 4,221.86 after falling from a gain of 0.2% to a loss of 0.7%. Most stocks in the Index and Wall Street were down, but gains from Apple, Microsoft and a few other tech heavyweights helped offset the losses.
The Dow Jones Industrial Average fell 210.22, or 0.6%, to 33,823.45, while the Nasdaq composite rose 121.67, or 0.9%, to 14,161.35, driven by technology gains and other high growth stocks.
In the bond market, the yield on the 10-year Treasury bill returned almost all of its surge from the previous day. It fell to 1.51% against 1.57% Wednesday night.
The two-year yield, which tends to move more with Fed stock expectations, was more stable. It went from 0.21% to 0.22%.
The first step the Fed is likely to take would be a slowdown in its $ 120 billion monthly bond purchases, which help keep mortgages low, but the Fed chairman said such reduction is still probably “a long way off”.
Any easing of Fed aid to the economy would be a big change for markets, which feasted on easy terms after the central bank cut short-term rates to zero and put other programs in place. emergency.
While the economy still needs support, the recovery is proving to be strong enough that it does not need the same emergency measures taken at the start of the pandemic, said Stephanie Link, chief investment strategist and portfolio manager at Hightower.
“We’re going to get a reduction,” she said. “They need it, we don’t need emergency measures right now.”
The economy has started to explode out of its coma as more widespread vaccinations help the world get closer to normal. At the same time, soaring commodity prices are forcing companies across the economy to raise their own prices for customers, from fast food restaurants to used cars.
This is fueling concerns about inflation. Much of the concern is whether the rise in inflation will be temporary, as the Fed predicts, or more durable. The reality could be more mixed. The rise in commodity prices is likely related to increased demand as the economy recovers, but the rise in wages is likely to be more sustainable as employers raise wages to attract workers, Link said.
Investors received somewhat disappointing economic news when the Labor Department said the number of Americans who apply for unemployment benefits last week increased slightly. The total of 412,000 workers claiming unemployment benefits was worse than economists expected. If this turns out to be a trend rather than an aberration, it could push the Fed to hold the line longer on supporting the economy.
Stocks of companies whose earnings are most closely tied to a strong economy and interest rates suffered some of the largest losses in the market.
S&P 500 energy stocks fell 3.5% after the price of crude oil fell.
Banks have struggled after falling long-term yields hurt their prospects for profit from loans. Bank of America fell 4.4% and JPMorgan Chase lost 2.9%.
Commodity producers were also weak, with miner Newmont losing 7% after the price of gold fell 4.7%. Gold tends to struggle when the Federal Reserve raises interest rates.
On the winning side were the large, tech-driven companies, which dominated the stock market for years as they continued to grow almost regardless of the strength of the economy. Amazon grew 2.2%, Microsoft 1.4%, and Apple 1.3%.
Homebuilder Lennar rose 3.6% after reporting second-quarter earnings and earnings above Wall Street expectations.
In Europe, German and French equities edged up, while the FTSE 100 in London fell 0.4%. In Asia, Japan’s Nikkei 225 fell 0.9% and South Korea’s Kospi fell 0.4%, but Hong Kong’s Hang Seng rose 0.4%.
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