Rate hike fears add to week’s stumble

Fears of a still-aggressive Fed continuing to shake investors

NEW YORK — Stocks stumbled Thursday on Wall Street and added to the week’s losses as markets remain anxious about the prospect of more aggressive action by the Federal Reserve to fight inflation.

Major indexes started the day higher and gradually lost ground until they fell sharply in late trading. The S&P 500 fell 73.69 points, or 1.8 percent, to 3,918.32. It marked the second-worst loss of the year for the benchmark index and further eroded gains made throughout January to kick off the year.

The sharp slide, which sank 95 percent of stocks in the S&P 500, was particularly hard on banks. The S&P 500’s financial sector slumped 4.1 percent.

The Dow Jones Industrial Average fell 543.54 points, or 1.7 percent, to 32,254.86, and the Nasdaq fell 237.65 points, or 2.1 percent, to 11,338.35.

The slump follows two days of testimony before Congress by Fed Chair Jerome Powell, who said the central bank was prepared to continue making big interest rate increases if necessary. Fears about a persistently aggressive Fed have been weighing on major indexes, all of which are on track for weekly losses.

The Fed’s inflation-fighting policies risk slowing the economy too much and pushing it into a recession, while also going too far in softening a strong labor market and putting people out of work.

A government report Thursday showed the number of Americans applying for unemployment benefits last week jumped by the most in five months, but layoffs remain historically low.

Yields on the two-year Treasury, which tends to track expectations for future Fed action, eased to 4.87 percent from about 5.05 percent just before the unemployment report’s release. It had been hovering at its highest level since 2007.

The unemployment data follows a report on Wednesday showing that the number of job openings advertised across the country last month was higher than economists expected.

A concern within the labor market reports for the Fed and Wall Street is the pace of wage growth. Strong gains are good for workers struggling to keep up with high inflation, but it could keep pushing inflation higher.

“It’s leading people to try and come to grips with what a stubbornly tight labor market means for economic growth as well as the inflationary environment,” said Keith Buchanan, portfolio manager at Globalt Investments.