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Wall Street closed its first losing week in the last four with an up-and-down session as investors brace for the Federal Reserve to tighten the brakes on the economy more aggressively to beat down inflation.
Big tech stocks once again led the market lower, and the S&P 500 fell 11.93 points, or 0.3 per cent, to 4,488.28 after wobbling much of the day. The Dow Jones Industrial Average rose 137.55, or 0.4 per cent, to 34,721.12. The weakness for tech stocks, meanwhile, dragged the Nasdaq composite down 186.30, or 1.3 per cent, to 13,711.00.
Wall Street wrapped up a losing week with a mixed session.Credit:AP
The Australian sharemarket is set for a positive start to the week, with futures on Saturday pointing to a gain of 27 points, or 0.4 per cent, at the open this morning.
For the week, the S&P 500 lost 1.3 per cent. Stocks have slumped as the Federal Reserve swings more aggressively toward fighting inflation by raising short-term interest rates and making other moves. It’s a sharp reversal from keeping rates at record lows to stimulate the economy and carry it through the pandemic.
Investors learned this week that the Fed may hike short-term rates by double the usual amount at several upcoming meetings, and that it came close to doing so last month. The last time that happened was in 2000. The Fed also indicated in the minutes from its last meeting that it’s likely to shrink its massive stockpile of bonds by up to $US95 billion ($128 billion) monthly, starting as soon as next month.
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Altogether, the moves should make it more expensive for US households and businesses to borrow, which in turn would slow the economy and hopefully halt the hottest inflation in 40 years.
Higher rates hurt all kinds of investments, particularly the stocks seen as the most expensive. That’s because higher rates mean better returns for owning relatively safe bonds, which makes investors less willing to pay higher prices for riskier assets like stocks.
That’s why big technology and other high-growth stocks have led the market lower recently. Amazon, Nvidia and Tesla were among the heaviest weights on the S&P 500 Friday, and each dropped at least 2 per cent.