Wall Street's tough week eases at end

The toughest week for Wall Street in nearly two months came to a quiet end on Friday, as stock indexes drifted to a mixed finish.

The S&P 500 rose 0.22%, but it still ended the week at its worst since December. The Dow Jones Industrial Average gained 169 points, or 0.5%, while the Nasdaq composite fell 0.61%.

Stocks have been struggling since rallying in January on hopes that the economy could avoid a severe recession and that cooling inflation could get the Federal Reserve to take it easier on interest rates. Worries have worsened recently that a still-strong jobs market could push upward on inflation and keep rates at a higher-for-longer level, much as the Fed has been warning.

Higher rates can drive down inflation, but they also raise the risk of a recession and drag down investment prices. And central banks around the world are intent on tightening the screws by raising rates further, even if at a slower pace than before.

“For most central banks the risk is that they have tightened too little, not too much,” economists led by Ethan Harris wrote in a BofA Global Research report.

“The ultimate gauge of success here is not avoiding a recession, but getting inflation on a path back to target,” Harris wrote.

Investors will get more updates on inflation next week when the government gives its latest monthly updates on prices at both the wholesale and consumer levels.

The worries about rates mean much of Wall Street's action has been in the bond market, where yields have climbed on expectations for a firmer Fed. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.73% from 3.66% late Thursday.

The two-year yield, which moves more on expectations for the Fed, ticked up to 4.50% from 4.48%. It was at 4.08% just over a week ago and is near its highest level since November.

Companies in recent weeks have also been delivering a mixed set of earnings reports for the end of 2022.

Lyft tumbled 36.4% following its latest report. The ride-hailing company gave a forecast for revenue in the first three months of 2023 that fell short of analysts' expectations.

Given worries about stillhigh inflation and a slowing economy eating into corporate profits, analysts have been cutting their forecasts for upcoming earnings for companies. So far this year, analysts have cut their expectations for S&P 500 companies' first-quarter earnings by 4.5%, according to strategists at Credit Suisse. That's a deeper cut than average.