Stocks stumble 2.8% as worries about interest rates worsen

Apr 21, 2022, 11:53 PM | Updated: Apr 23, 2022, 2:00 pm

NEW YORK (AP) — Stocks tumbled on Wall Street Friday, leaving the S&P 500 with its biggest one-day loss in almost seven weeks, as worries deepen about a surge in interest rates and the U.S. central bank’s efforts to fight inflation.

Several disappointing profit reports from companies also shook what’s been the market’s main pillar of support.

The S&P 500 sank 2.8% and marked its third losing week in a row. The Dow Jones Industrial Average slumped 2.8%, its biggest drop in 18 months, after briefly skidding more than 1,000 points. The Nasdaq also had its worst day in nearly seven weeks, closing 2.6% lower.

A day earlier, Wall Street seemed set for healthy gains for the week after American Airlines, Tesla and other big companies reported strong profits or better forecasts for future earnings than analysts expected. Such corporate optimism has helped stocks remain relatively resilient, even as worries swirl about the highest inflation in decades, the war in Ukraine and the coronavirus.

But markets buckled as the chair of the Federal Reserve indicated the central bank may indeed hike short-term interest rates by double the usual amount at upcoming meetings, starting in two weeks.

The Fed has already raised its key overnight rate once, the first such increase since 2018, as it aggressively removes the tremendous aid thrown at the economy through the pandemic. It’s also preparing other moves to put upward pressure on longer-term rates.

By making it more expensive for businesses and households to borrow, the higher rates are meant to slow the economy, which should hopefully halt the worst inflation in generations. But they can also trigger a recession, all while putting downward pressure on most kinds of investments.

“After years of being very accommodative, the Fed has made it clear that policy is going to be tighter for the foreseeable future,” said Brian Price, head of investment management for Commonwealth Financial Network. “Their hawkish stance is giving investors pause as many are left to evaluate the impact on profit margins and (stock) multiples moving forward.”

The S&P 500 fell 121.88 points to 4,271.78. The Dow dropped 981.36 points to 33,811.40. The Nasdaq lost 335.36 points, closing at 12,839.29. The Dow and Nasdaq also posted losses for the week.

Smaller company stocks also fell sharply. The Russell 2000 slid 50.80 points, or 2.6%, to 1,940.66.

A preliminary report on Friday indicated the U.S. services industry’s growth is slowing, hurt in particular by surging costs for fuel, wages and other expenses.

Treasury yields have soared as investors prepare for a more aggressive Fed, and stocks have often moved in the opposite direction of them. The yield on the 10-year Treasury slipped to 2.90% from 2.91% late Thursday, but remains close to its highest level since 2018. It began the year at 1.51%.

The two-year Treasury yield, which moves more on expectations for Fed action on short-term rates, has zoomed even more. It was at 2.69% late Friday after more than tripling from 0.73% at the start of the year.

Markets around the world are feeling similar pressure on rates and inflation, particularly in Europe as the war in Ukraine pushes up oil, gas and food costs.

On Wall Street, most stocks fell, including more than 95% of the companies in the S&P 500. Technology and health care companies were among the biggest weights. Apple fell 2.8% and Microsoft dropped 2.4%.

HCA Healthcare slumped 21.8% for the biggest decline in the S&P 500 after reporting weaker earnings per share for the latest quarter than analysts expected. The hospital operator also cut its forecasted ranges for revenue and earnings this year.

Verizon Communications slid 5.6% after it said it expects earnings for the year to fall at the lower end of the range it had previously forecast. The company also reported slightly weaker revenue than expected for the first three months of the year.

Retailer Gap sank 18% after it cut its forecast for sales for the current fiscal quarter and said the CEO of its Old Navy business will leave the company.

The disappointing company earnings and outlooks, plus Powell’s remarks Thursday, have ratcheted up worries for investors already trying to navigate economic uncertainty over the lingering global supply chain issues, the pandemic and the war in Ukraine, said Greg Bassuk, CEO of AXS Investments.

“Looking ahead, that’s putting a sour taste in investors’ mouths around the likelihood of corporate earnings being stronger for the balance of 2022,” he said.

___

AP Business Writer Yuri Kageyama contributed. Veiga reported from Los Angeles.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

FILE - Protesters stand outside of the Senate chamber at the Indiana Statehouse on Feb. 22, 2023, i...

Associated Press

LGBTQ+ Americans are under attack, Human Rights Campaign declares in state of emergency warning

The Human Rights Campaign declared a state of emergency for LGBTQ+ people in the U.S. on Tuesday.

2 days ago

FILE - People wait in line outside the Supreme Court in Washington to listen to oral arguments in a...

Associated Press

Supreme Court opened the door to states’ voting restrictions. Now a new ruling could widen them.

Within hours of a U.S. Supreme Court decision dismantling a key provision of the Voting Rights Act, Texas lawmakers announced plans to implement a strict voter ID law that had been blocked by a federal court. Lawmakers in Alabama said they would press forward with a similar law that had been on hold.

2 days ago

Gavel (Pexels Photo)...

Associated Press

Ex-teacher sentenced to prison for making death threat against Arizona legislator

A former Tucson middle school teacher was sentenced Tuesday to 2 ½ years in prison after pleading guilty to making a death threat against Arizona state Sen. Wendy Rogers.

2 days ago

FILE - Police officers stand outside a Target store as a group of people protest across the street,...

Associated Press

Pride becomes a minefield for big companies, but many continue their support

Many big companies, including Target and Bud Light's parent, are still backing Pride events in June despite the minefield that the monthlong celebration has become for some of them.

3 days ago

FILE - Then-Democratic presidential candidate Joe Biden plays music on a phone as he arrives to spe...

Associated Press

Biden, looking to shore up Hispanic support, faces pressure to get 2024 outreach details right

Joe Biden vowed in 2020 to work “like the devil” to energize Hispanic voters, and flew to Florida seven weeks before Election Day to do just that.

3 days ago

Editorial members of the Austin American-Statesman's Austin NewsGuild picket along the Congress Ave...

Associated Press

Correction: US-Gannett Walkout story

Journalists at two dozen local newspapers across the U.S. walked off the job Monday to demand an end to painful cost-cutting measures and a change of leadership at Gannett, the country's biggest newspaper chain.

3 days ago

Sponsored Articles

...

SANDERSON FORD

Thank you to Al McCoy for 51 years as voice of the Phoenix Suns

Sanderson Ford wants to share its thanks to Al McCoy for the impact he made in the Valley for more than a half-decade.

...

Desert Institute for Spine Care

Spinal fusion surgery has come a long way, despite misconceptions

As Dr. Justin Field of the Desert Institute for Spine Care explained, “we've come a long way over the last couple of decades.”

...

re:vitalize

Why drug-free weight loss still matters

Wanting to lose weight is a common goal for many people as they progress throughout life, but choosing between a holistic approach or to take medicine can be a tough decision.

Stocks stumble 2.8% as worries about interest rates worsen