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AP Business Writer
NEW YORK (AP) — Wall Street’s dismal run is getting a bit of a reprieve, and stocks are mostly holding steady on Friday, but the market is still heading for its worst week in six months. The S&P 500 was 0.1% higher in afternoon trading, coming off an ugly slide caused by the stock market’s growing understanding that interest rates likely won’t come down much anytime soon. The Dow Jones Industrial Average was up 1 point, or less than 0.1%, at 34,074, as of 3:02 p.m. Eastern time, and the Nasdaq composite was 0.2% higher.
Pressure has built on Wall Street as yields in the bond market climb to their highest levels in more than a decade. They’ve been rising for months and accelerated this week after the Federal Reserve indicated it’s 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 were easing a bit Friday, which reduced the pressure on the stock market. The yield on the 10-year Treasury slipped to 4.44% from 4.50% late Thursday. It’s still near its highest level since 2007.
The two-year Treasury yield, which moves more closely with expectations for the Fed, dipped to 5.11% 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’s meant pain for technology stocks. Nvidia trimmed its loss for the week to 5% after rising 1.7% Friday. The Nasdaq composite, which is full of tech and other high-growth stocks, is on track a loss of 3.3% this week. A couple tech-oriented companies got better news Friday after U.K. regulators gave a preliminary approval to Microsoft’s restructured $69 billion deal to buy video game maker Activision Blizzard. It would be one of the largest tech deals in history, and shares of Activision Blizzard rose 1.7%. Microsoft fell 0.5%.
Shares of automakers were mixed even after the United Autoworkers said Friday 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 2.2%, and General Motors fell 0.4%. Stellantis rose 0.3%. 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 of the long list of challenges looming over the economy, including a possible U.S. government shutdown amid squabbling on Capitol Hill, the upcoming resumption of student-loan repayments and shaky economies around the world.
Hanging above them all is the realization sinking in on Wall Street that interest rates may be staying higher for longer. The Fed indicated Wednesday it may raise its main interest rate one more time this year. From there, the most commonly predicted path by Fed officials would be half a percentage point of cuts in 2024 from a level of 5.50% to 5.75%. Three months ago, Fed officials were thinking a full percentage point of cuts may be the likeliest outcome.
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 U.S. banks.