Wall Street closes another bumpy week

Concerns the Fed will raise interest rates re-emerge after inflation report

NEW YORK — Wall Street closed another bumpy week with a mixed performance on Friday amid worries that inflation is not cooling as quickly or as smoothly as hoped.

The S&P fell 0.3 percent after paring a bigger loss from the morning. The Dow Jones Industrial Average rose 129 points, or 0.4 percent, after coming back from an early loss of 179 points, while the Nasdaq composite fell 0.6 percent.

Stocks have hit turbulence in February after shooting higher in January with hopes that cooling inflation could get the Federal Reserve to take it easier on interest rates and that the economy could avoid a severe recession. Reports recently have shown more strength than expected in everything from the job market to retail sales to inflation itself, raising worries that the Federal Reserve will have to get tougher on interest rates.

That’s forced a sharp recalibration on Wall Street as investors move their forecasts for rates closer to the “higher for longer” stance that the Federal Reserve has long been espousing. The hope is that high rates can drive down inflation, but they also hurt investment prices and risk causing a severe recession.

Economists at Goldman Sachs added one more hike by the Fed in June to their forecast, meaning they see its key short-term rate ultimately rising to a range of 5.25 percent to 5.50 percent. That rate was at virtually zero a year ago, and it hasn’t topped 5.25 percent since the dot-com bubble was deflating in 2001. It’s currently at a range of 4.50 percent to 4.75 percent.

The two-year Treasury yield topped 4.70 percent in the morning, up from

4.62 percent late Thursday and from less than 4.10 percent earlier this month. It later pulled back to 4.61 percent. It has recently approached its heights from November, when it reached its highest point since 2007.

Still offering some support to the stock market are remaining hopes among investors that the economy can avoid a worst-case recession. Jobs are still plentiful, and shoppers are still spending to prop up the most important part of the economy, consumer spending. That’s helped the S&P 500 index hold onto a gain of 6.2 percent since the start of the year.

But critics say many of those areas also tend to be among the last to feel the effects of higher interest rates and may still crack. And the Fed has already raised rates by the most aggressive pace in decades.

On the winning side was Deere, which gained 7.5 percent after reporting stronger profit for its latest quarter than analysts expected.

Altogether, the S&P 500 fell 11.32 points to 4,079.09. The Dow rose 129.84 to 33,826.69, and the Nasdaq fell 68.56 to 11,787.27.