Wall Street digests Federal Reserve interest rate hike, stocks fall

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Stocks fell on Wall Street on Thursday morning and added to weekly losses for major indexes as central banks around the world rising interest rates to fight inflation.

The S&P 500 fell 0.6% at 10:19 a.m. Eastern. The Dow Jones Industrial Average fell 98 points, or 0.3%, to 30,086 and the Nasdaq fell 1%. Every major index is solidly on track for weekly losses.

Losses were significant and were led by retailers, technology stocks and industrials. Starbucks fell 3.4% and Apple 1.2%. Energy stocks gained ground as US crude oil prices rose 3.4%. Valero Energy increased by 1.4%.

Bond yields rose. The 2-year Treasury yield, which tends to track Fed action expectations, rose significantly to 4.12% from 4.02% late Wednesday. It is trading at its highest level since 2007. The 10-year Treasury yield, which influences mortgage rates, jumped to 3.65% from 3.51% on Wednesday evening.

Central banks in Europe and Asia raised interest a day after the Federal Reserve made another big rate hike and signaled more were on the way.

Great Britain central bank raised its policy rate by another half a percentage point. Central Bank of Switzerland raised its benchmark lending rate by its largest margin yet, 0.75 percentage points, and said it could not rule out further hikes. The central banks of Norway and the Philippines also raised interest rates.

The Fed and other central banks raise interest rates to make borrowing more expensive. The goal is to slow economic growth enough to bring inflation under control, but not so much that economies slide into recession. Wall Street worries that the Fed may be putting the brakes on an already slowing economy too hard, making a slide into a recession more likely.

On Wednesday, Fed Chairman Jerome Powell underscored his determination to raise rates high enough to bring inflation back toward the central bank’s 2% target. Powell said the Fed had just started to hit that level with this most recent increase. The U.S. central bank raised its key rate, which affects many consumer and business loans, within a range of 3% to 3.25%. This is the fifth rate hike this year and zero at the start of the year.

The Fed also released a forecast known as the “dot plot” that showed it expects its benchmark rate to be 4.4% by the end of the year, a point of more than expected in June.

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AP Business Writers Joe McDonald and Matt Ott contributed to this report.

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