Stocks Slip After Fed Comment

Christopher Waller suggests rates will need to stay high for a period
By Newser Editors and Wire Services
Posted Apr 14, 2023 3:45 PM CDT
Stocks Slip as Traders Count on Higher Interest Rates
Federal Reserve Board of Governors member Christopher Waller poses for a photo on May 23, 2022.   (AP Photo/Patrick Semansky, File)

Stocks dipped Friday on Wall Street as worries about interest rates overshadowed an encouraging start to earnings reporting season for big US companies, the AP reports.

  • The S&P 500 fell 8.58 points, or 0.2%, to 4,137.64.
  • The Dow Jones Industrial Average lost 143.22, or 0.4%, to 33,886.47.
  • The Nasdaq composite sank 42.81, or 0.4%, to 12,123.47.
The S&P 500 still squeezed out a fourth winning week in the last five, built in part on hopes the Federal Reserve may soon end its barrage of rate hikes as inflation cools. High interest rates can stifle inflation but only by slowing the economy, raising the risk of a recession and dragging on prices for investments.

A top Fed official dampened those hopes Friday after saying that inflation remains far too high and that more tightening may be needed. Christopher Waller, a member of the Fed's governing board, also said that even after hikes to rates end, they will likely need to stay high for longer than markets expect. After his comments, traders built bets that the Fed will raise rates at its next meeting in May, instead of taking its first pause in more than a year. Some also began betting the Fed may hike rates again in June, according to data from CME Group. High-growth stocks tend to be among the most hurt by high rates, and Big Tech stocks were among the heaviest weights on the S&P 500. Microsoft fell 1.3%.

Swaths of the economy have already begun slowing under the weight of higher interest rates, raising worries that a recession may be likely. A report on Friday showed US shoppers cut their spending at retailers by more last month than expected. Much of that was due to falling gasoline prices, and the drop for what economists call "core retail sales" wasn't as bad as forecast. "The Fed's challenge has been to cool inflation without putting the economy into a deep freeze in the process,” said Mike Loewengart of Morgan Stanley's Global Investment Office. "The dynamic is still playing out in the markets, and we could see more choppy price action as a result."

(More stock market stories.)

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