NEW YORK — Stocks are tumbling on Wall Street Friday as dispiriting evidence keeps piling up to show inflation isn’t cooling as quickly as hoped.
The S&P 500 was 1.6% lower in morning trading and on track for its worst week since early December. The Dow Jones Industrial Average was down 451 points, or 1.4%, at 32,702, as of 10:19 a.m. Eastern time, while the Nasdaq composite was 2% lower.
Stocks have dropped through February as a stream of reports have shown everything from inflation to the job market to spending by shoppers is staying hotter than expected. That’s forced Wall Street to raise its forecasts for how high the Federal Reserve will have to take interest rates and then how long to keep them there.
Higher rates can drive down inflation, but they also raise the risk of a recession because they slow the economy. They likewise hurt prices for stocks and other investments.
The latest reminder came Friday after a report showed that the measure of inflation preferred by the Fed came in higher than expected. It said prices were 4.7% higher in January than a year earlier, after ignoring costs for food and energy because they can swing more quickly and sharply than others. That was an acceleration from December’s inflation rate, showing the wrong momentum, and it was higher than economists’ expectations for 4.3%.
It echoed other reports from earlier in the month that showed inflation at both the consumer and wholesale levels was higher than expected in January.
Other data Friday showed that consumer spending returned to growth in January, jumping 1.8% from December. That’s pivotal because spending by consumers makes up the largest piece of the economy. A separate reading on sentiment among consumers came in slightly stronger than expected, while sales of new homes improved a bit more than expected.
Such strength paired with the remarkably resilient job market raises hope that the economy can avoid a recession in the near term.
But it can also feed into upward pressure on inflation, and Wall Street worries it could push the Fed to raise rates even higher and keep them there even longer than it otherwise would. Investors’ hopes for a possible cut to rates later this year have been washing out of the market.
Traders are now also placing bets on the Fed raising its key overnight rate above 5.25% and keeping them there through the end of the year. That’s higher than what the Fed was talking about in December.
Expectations for a firmer Fed have caused yields in the Treasury market to shoot higher this month, and they climbed further Friday.
The yield on the 10-year Treasury rose to 3.95% from 3.89% late Thursday. It helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, rose to 4.78% from 4.71%.
Tech and high-growth stocks once again took the brunt of the pressure. Investments seen as the most expensive, riskiest or making their investors wait the longest for big growth are among the most vulnerable to higher rates.
Apple, Microsoft, Amazon, Tesla and Nvidia all fell more than 2% and were among the heaviest weights on the S&P 500.
They were among plenty of company amid Wall Street’s wipeout. More than 90% of stocks in the S&P 500 fell.
Software company Autodesk had one of the largest losses in the index, falling 10.6% despite reporting stronger profit and revenue for the latest quarter than expected. Analysts said investors were disappointed with its forecasts for upcoming results.
Boeing lost 4.4% after it again stopped deliveries of its 787 passenger jet because of questions around a supplier’s analysis of a part near the front of the plane.
Stock markets abroad also mostly fell, with a 1.1% drop for France’s main index and 1.7% fall in Hong Kong.
Japan’s Nikkei 225 was an outlier, rising 1.3%. The nominee to head the country’s central bank, economist Kazuo Ueda, told lawmakers he favors keeping Japan’s benchmark interest rate near zero to ensure stable growth. That’s despite Japan reporting its core consumer price index, excluding volatile fresh foods, rose the most in 41 years in January.
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AP Business Writers Elaine Kurtenbach, Matt Ott and Yuri Kageyama contributed.
