Stocks steady after interest rate warning causes dip

Stocks steadied on Wall Street and closed with a mixed finish Wednesday, a day after worries about interest rates sent them to one of their worst tumbles of the year.

The S&P 500 rose 5.64 points, or 0.1%, to 3,992.01. The Dow Jones Industrial Average fell 58.06 points, or 0.2%, to 32,798.40, while the Nasdaq composite added 45.67 points, or 0.4%, to 11,576.00.

They were coming off a sharp drop Tuesday after the head of the Federal Reserve warned policymakers could speed up increases to interest rates if pressure on inflation stays high.

Such increases can ease inflation by slowing the economy, but they also hit prices for stocks and other investments and raise the risk of a recession in the future.

The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, ticked up to 3.98% from 3.97% late Tuesday.

The yield on the two-year Treasury, which moves more on expectations for the Fed, rose to 5.05% from 5.02%. It’s near its highest level since 2007.

Yields on shorter-term Treasurys remain far above those for Treasurys maturing many more years in the future. That’s an unusual occurrence and one that Wall Street sees as a fairly reliable signal for an upcoming recession.

Based on where traders are betting yields will be in the future, it appears the market is implying inflation will continue to run hot, the Fed will quickly ramp up rates and then will reduce them only gradually afterward, according to Jonathan Golub, chief U.S. equity strategist at Credit Suisse.

He also said the bond market appears to be signaling a recession could begin in August 2025.

On Wall Street, Tesla Inc. was one of the heaviest weights on the market after U.S. regulators received two complaints that steering wheels came off its Model Y SUV while being driven. Share of the company dropped 3%.

On the winning side was Campbell Soup Co., which rose 1.9% after reporting stronger profit and revenue for the latest quarter than expected.