Stocks lose ground on Wall Street, extending weekly losses

By DAMIAN J. TROISE (AP Business Writer)

NEW YORK (AP) — Stocks fell on Wall Street Friday as worries grow that the Federal Reserve and other central banks are willing to bring on a recession if that’s what it takes to get inflation under control.

The S&P 500 shed 1% as of 10:08 a.m. Eastern and is headed for its second straight weekly loss. The Dow Jones Industrial Average fell 321 points, or 1%, to 32,880 and the Nasdaq fell 0.6%.

The Fed this week raised its forecast for how high it will ultimately take interest rates and tried to dash some investors’ hopes that rate cuts may happen next year. In Europe, the central bank came off as even more aggressive in many investors’ eyes.

Inflation has been easing from its hottest levels in decades, but remains painfully high. That has prompted the Fed to maintain its aggressive attack on prices by raising interest rates to slow economic growth. The strategy increasingly risks slamming on the brakes too hard and sending an already slowing economy into a recession.

A mixed report from S&P Global on Friday highlighted that risk. It showed that business activity slowed more than expected this month as inflation squeezes companies, but also reported that inflation pressures have been easing.

“In short, the survey data suggest that Fed rate hikes are having the desired effect on inflation, but that the economic cost is building and recession risks are consequently mounting,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said.

Markets in Europe fell and markets in Asia were mostly lower.

Bond yields gained ground. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.53% from 3.45% late Thursday. The yield on the two-year Treasury, which closely tracks expectations for Fed moves, rose to 4.26% from 4.24% late Thursday.

—

Elaine Kurtenbach and Matt Ott contribute to this report.