Worries about high rates send stocks lower
NEW YORK — Stocks stumbled on Wall Street Thursday 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.
SVB Financial Group lost 60 percent of its value after announcing plans to raise up to $1.75 billion in order to strengthen its position amid concerns about higher interest rates and the economy. Bank of America, Citigroup and other big banks fell sharply.
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 inflationfighting 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 many people out of work.
A government report on Thursday showed that 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. The U.S. government’s more comprehensive report on hiring is scheduled for Friday.
A big concern within the labor market reports for the Fed and Wall Street is the pace of wage growth. Strong wage gains are good for workers struggling to keep up with high inflation, but it could also keep pushing inflation higher, making it harder for the central bank to fight high prices.