NEW YORK (AP) – Wall Street was adrift Monday, while oil prices continued to rise to add to inflationary pressures.
The S&P 500 rose 0.1% in intraday trading, snapping a two-week losing streak. As of 11 a.m. ET, the Dow Jones Industrial Average was slightly up 4 points (less than 0.1%) at $34,623, while the Nasdaq Composite was little changed.
Stock prices have been volatile since early August due to uncertainty over whether the U.S. Federal Reserve’s major interest rate hikes would eventually be completed. Rising interest rates have helped keep inflation under control from last summer’s peak, but they have also slowed the economy and hurt the prices of stocks and other investments.
Traders almost universally expect the Fed to keep interest rates unchanged at this week’s meeting, which ends Wednesday. More attention will be focused on the outlook Fed officials release on how they expect interest rates, the economy and the job market to move in the coming years.
The first thing the market will focus on is how much higher Fed officials think key interest rates will rise this year. Traders expect there’s about a 40% chance the Fed will raise rates again in November or December, according to CME Group data.
But just as much attention will be paid to what Fed officials say about next year, when investors expect the Fed to start cutting rates. Investors are eager for these rate cuts, which typically ease financial conditions and stimulate financial markets. The big question is how far the Fed can cut interest rates.
Economists at Goldman Sachs expect Fed officials to raise interest rates once again this year to a range of 5.50% to 5.75%, before marking a full point of rate cuts next year.
There are concerns that interest rates will need to remain high for an extended period of time to fully bring inflation down to the Fed’s 2% goal. Although the underlying trend in inflation has generally continued to improve, the recent rise in oil prices has complicated the situation.
U.S. crude rose another 1% on Monday to $90.96 a barrel. That’s up from less than $70 in July. Brent crude, the international standard, added 0.9% to $94.74 per barrel.
Rising prices for gasoline and other fuels are a big reason why consumers feel inflation has accelerated from 3.2% to 3.7% last month.
Higher fuel prices, along with concerns that interest rates will remain high for an extended period of time, are pushing up U.S. Treasury yields across bond markets.
As of late Friday, the 10-year U.S. Treasury yield was steady at 4.33%. However, it has mostly increased since it stopped at around 3.40% in May.
The yield on the two-year note, closer to the Fed’s expectations, rose to 5.05% from 5.04% late Friday.
Concerns about a possible recession also remain, although they are fading with a flurry of reports showing that the economy and job market remain strong.
One cause for concern is the situation with bond yields, with short-term yields such as two-year bonds continuing to be higher than long-term yields. This is an unusual occurrence that was common before past recessions.
Another warning signal comes from the Leading Economic Indicators Index, which looks at new manufacturing orders, consumer expectations about business conditions, and other factors that can indicate the direction of the economy.
A six-month annualized rate of change of more than 3% is always associated with a recession, said Doug Ramsey, chief investment officer at Rootold Group.
It has been 15 months since such recession warnings occurred in June 2022. Historically, the longest period between such a trigger and a recession was the 16 months before the Great Recession. If this matches up, it could signal a recession starting in October, Ramsey said.
On Wall Street, Clorox fell 1% after it said a cybersecurity attack caused widespread disruption to its business. The damage situation is still being investigated, but he said he expects it to be a material for future results. Clorox also said it believes the fraud has been contained.
Ford and General Motors declined as limited companies. Strike by the United Auto Workers Union It was postponed to another day. Ford fell 1.5% and General Motors fell 0.4%.
Meanwhile, the share prices of energy producers were particularly high due to the rise in oil prices. Valero Energy and Marathon Petroleum each rose 2%.
In overseas stock markets, Hong Kong’s Hang Seng Index fell 1.4% after reports over the weekend that police had detained staff at a troubled real estate developer’s asset management business. China Evergrande.
Indices fell not only in Europe but also in much of the rest of Asia.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.