Wall Street closes lower, adding to last week’s losses

By DAMIAN J. TROISE and ALEX VEIGA
AP Business Writers

Stocks closed lower on Wall Street, adding to their recent losses as traders realized how determined the Federal Reserve is to keep interest rates high to fight inflation. The S&P 500 gave back almost 1% Monday. Technology companies were the biggest drag on the index. The Nasdaq and the Dow Jones Industrial Average also fell. This week investors will get more updates on the economy including the government’s monthly jobs report on Friday and a reading on consumer confidence Tuesday from the Conference Board. European markets were also lower and Asian markets closed lower overnight. Treasury yields were higher.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

Stocks are edging lower on Wall Street in afternoon trading Monday, adding to their hefty losses from last week when the Federal Reserve pledged to keep interest rates high as long as it takes to tame inflation.

The S&P 500 fell 0.2% as of 3:20 p.m. Eastern, after wavering between small gains and losses. The benchmark index fell 3.4% Friday, its biggest single-day drop since mid-June.

The Dow Jones Industrial Average fell 39 points, or 0.1% to 32,243, following Friday’s 1,008 point decline. The Nasdaq fell 0.5%.

Technology stocks were among the biggest weights on the market. Apple slipped 0.9%.

Health care stocks also lost ground. Drug delivery technology company Catalent slumped 6.9% after giving investors a disappointing revenue forecast.

Energy stocks made gains as U.S. crude oil prices rose 4.2%. Exxon Mobil rose 2.8%.

The market is coming off its worst weekly pullback since mid-June after Fed chief Jerome Powell indicated on Friday that the central bank will raise rates into next year and keep them elevated as it tries to quell demand and bring down prices for goods and services.

The open-endedness implied by how long the Fed may have to keep raising rates has, for now, quieted speculation on Wall Street that recent data showing more moderate inflation would prompt the central bank to act less aggressively.

“We’re in this period where you’re going to see volatility be more of the norm versus the exception and will probably continue until, frankly, inflation gets under control and that then sets the motion for the Fed to become a little bit more dovish,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

The Fed’s last two hikes have been by 0.75 points, and Wall Street is expecting a third such increase in September, according to CME Group. Some investors had hoped that the Fed would ease up on rate hikes into next year if inflation subsides. That sentiment led to a rally for stocks in July and early August. All three major indexes are now lower this month.

The yield on the 10-year Treasury, which follows expectations for longer-term economic growth and inflation, rose to 3.11% from 3.03% late Friday. The yield on the two-year Treasury, which tends to track expectations for Fed action, rose to 3.44% from 3.38%.

Investors have been closely watching economic reports to get a better sense of how much the economy is slowing and whether inflation is starting to cool from the hottest levels in four decades.

The Fed’s preferred gauge of inflation decelerated last month, while other data shows consumer spending slowed. Wall Street will get several more updates on the economy this week.

The Conference Board will release its latest reading on consumer confidence on Tuesday.

The government will release its closely watched monthly jobs report on Friday. The employment market has remained resilient amid a broader slowdown for the economy. That has helped temper worries that the U.S. is facing a potential recession.

European markets were also lower and Asian markets closed lower overnight. Chinese economic data showing a drop in industrial profits indicated that a strong recovery there will take time, amid fresh COVID-19 restrictions.