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Wall Street Prepares For Higher Interest Rates As Stocks Waver
- By The Financial District
- Jul 14, 2022
- 2 min read
Stocks are wavering on Wall Street on Wednesday after highly anticipated data on inflation turned out to be considerably worse than expected, according to Stan Choe of the Associated Press (AP) early on July 14, 2022.
Photo Insert: Tribute of the New York Stock Exchange to the late Japanese Prime Minister Shinzo Abe
The S&P 500 originally fell as much as 1.6 percent on concerns that the Federal Reserve will dramatically raise interest rates to stem the country's soaring inflation.
But, as has become the pattern on Wall Street this volatile year, markets took a couple of U-turns throughout the morning, and equities regained much of their losses as a decline in Treasury yields alleviated the pressure, according to Joe McDonald for AP.
After briefly reversing all of its early losses to peak higher, the S&P 500 was 0.2 percent lower in afternoon trading. As of 12:52 p.m. Eastern time, the Dow Jones Industrial Average was down 112 points, or 0.4 percent, at 30,871.
After falling as much as 2.1 percent earlier, the Nasdaq composite was up 0.1 percent. Inflation and the Federal Reserve's response to it have been at the heart of this year's sell-off on Wall Street. Inflation is not only still very high, but it is becoming worse, according to figures released on Wednesday.
“For four or five months now, we’ve been counting on peak inflation and we’ve been disappointed consistently,” said John Lynch, chief investment officer at Comerica Wealth Management.
Consumer prices were 9.1 percent higher than a year ago last month, accelerating from May's 8.6 percent inflation rate. This was also lower than the 8.8 percent predicted by economists. The Fed's primary tool for combating inflation is raising short-term interest rates, which it has done three times already this year.
Following the release of Wednesday's inflation report, traders now believe the Federal Reserve will raise its benchmark interest rate by at least three-quarters of a percentage point at its next meeting in two weeks.
