NEW YORK (AP) — Wall Street was mixed on Monday, but is holding up a bit after losing three straight weeks in a dismal August.
The S&P 500 rose 0.4% in early trading. At 9:50 a.m. ET, the Dow Jones Industrial Average fell 22 points, or 0.1 percent, to $34,478, while the Nasdaq Composite rose 0.8 percent.
Security software maker Palo Alto Networks jumped 15%, making it the biggest gainer in the S&P 500 index. The California company reported spring earnings better than analysts expected late Friday.
Electric car maker Tesla rose 4.4%, recouping some of last week’s 11% drop. It struggled last week along with other high-growth stocks because it was seen as one of the stocks most affected by rising interest rates and its bond yields were rising sharply.
In addition to fears of a growing dominance in the bond market, fears of a sluggish economic recovery in China also rocked markets around the world this month.
The main event of the week is likely to be Federal Reserve Chairman Jerome Powell’s speech on Friday. The venue, Jackson Hole, Wyoming, has been the site of major policy announcements by the Fed in the past and is one of the most important annual events for central bankers around the world.
The worry is that Mr. Powell will dash investors’ hopes that the Fed has already raised rates for the last time and that the next step will be a rate cut early next year.
The Fed has already cut key rates Inflation hit its highest level since 2001 as part of efforts to curb high inflation. High interest rates work by blatantly slowing the overall economy and driving down investment prices.
On Monday morning, 10-year Treasury yields again approached their highest level since 2007. That’s good news for bond investors, who are earning more interest on their investments. But investors are also less willing to pay higher prices for stocks and other investments that are more volatile than safe-haven Treasuries.
Yields on 10-year bonds climbed to 4.32% from 4.25% late Friday. If it reaches 4.34%, it will be the highest level since 2007. It was below 0.70% three years ago.
Goldman Sachs’ Lexi Cantor and Michael Cahill say that while expectations are high for Powell’s speech, it may not ultimately send a strong signal from Jackson Hole.
The minutes of the last policy meeting in July seem to indicate that the Fed is unsure of its next course of action. He reiterated that future interest rate decisions will be based on future data on inflation and the economy. A big report will be released on each of these themes the week after Powell’s speech. One is the latest monthly update on how the Fed recommends measuring inflation, and the other is the monthly employment report.
“The Fed will wait for information on these new data before changing its current position,” Kanter and Cahill said in a note.
Meanwhile, Bank of America economists said Powell could say a rate hike is likely at an upcoming Fed meeting, given recent economic reports have been so strong. .
“We think Powell’s tone at Jackson Hole is more unbalanced than the FOMC minutes in July,” they wrote in a BofA Global Research report.
The economy has remained remarkably resilient despite the significant rise in interest rates. While that will ease long-standing fears about a possible recession, it could also increase upward pressure on inflation.
Another big event for the market is Nvidia’s earnings report due on Wednesday. The company’s share price has exploded this year, more than tripling, on the excitement of huge demand for its artificial intelligence technology.
Nvidia’s Wednesday report may offer a hint as to whether all the furor was warranted. It rose 4.6% on Monday.
The spring earnings season is coming to an end for the S&P 500 companies. As is usually the case, the majority report better results than feared. But it does little to support the stock market. In August, the S&P 500 index recaptured more than a quarter of its year-to-date seven-month gain.
In addition to the possibility of longer rate hikes, concerns about China’s economic recovery are also weighing on global markets.
Hong Kong’s Hang Seng fell another 1.8% on Monday, down 12.2% so far in August alone. Stocks in Shanghai also fell 1.2%.
China cut bank lending rates, but the move fell short of expectations by some analysts.
Earlier this year, there were growing hopes that China’s strong economic recovery would underpin the global economy. Instead, the world’s second-largest economy fared worse than expected.
Elsewhere overseas, stock indices posted modest gains across Europe and much of Asia, excluding China.
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Contributed by AP Business reporters Matt Ott and Joe McDonald.