Stocks fall as fears of rate hike loom

Roller-coaster week persists as profit reports are varied

NEW YORK — Stocks dropped Thursday following another mixed set of profit reports from companies, as rising expectations for interest rates keep up the pressure on Wall Street.

The S&P 500 fell 0.9 percent, while the Dow Jones Industrial Average lost 249 points, or 0.7 percent, and the Nasdaq composite sank 1 percent. All three indexes had been up by close to 1 percent in the morning, before momentum gave out.

Stocks have been shaky this week, flipping from gains to losses and back again amid uncertainty about where interest rates and inflation are heading. A strong jobs market has investors buying more into the Federal Reserve’s forecast that it will hike rates a couple more times before holding them at a high level through this year. High rates can drive down inflation but also raise the risk of a recession and hurt investment prices.

A narrowing disconnect between markets and the Fed could lead to less volatility in markets in the future, said Thomas Martin, senior portfolio manager at Globalt Investments. But for now, with a jumble of earnings reports pouring in from companies along Wall Street and questions remaining about whether the economy can avoid a sharp recession, swings are likely to remain.

In the bond market, a warning signal is continuing to flash red with yields on shorter-term Treasurys well above longer-term Treasurys. It’s an unusual occurrence that has often preceded recessions in the past.

High inflation and worries about a slowing economy have already begun to hit corporate earnings, and big U.S. companies have been reporting relatively lackluster results for the end of 2022.

The Walt Disney Co. surprised the market when it reported stronger profit for the latest quarter than analysts expected.

It also said it will cut about 7,000 jobs as part of a plan to reduce its costs by $5.5 billion.

Disney joined the growing list of high-profile companies to announce layoffs amid an uncertain economy. The bulk began in the technology industry.

Overall, though, the job market has remained resilient.

Last week, 196,000 U.S. workers filed for unemployment benefits. That was slightly more than the prior week, but it remained below the 200,000 level for a fourth straight week.