Stocks drift; Fed's Powell sees long road ahead on inflation

People walk past the New York Stock Exchange on Wednesday, June 29, 2022 in New York. Stocks are opening lower across the board on Wall Street, Tuesday, July 5, and crude oil prices are dropping again. Treasury yields also fell as traders continued to worry about the state of the economy (AP Photo/Julia Nikhinson)

NEW YORK (AP) — Stocks are mixed on Wall Street after the Federal Reserve’s head said he still sees progress being made against inflation, even after a stunningly strong jobs report last week. The S&P 500 was 0.3% lower Tuesday afternoon, after spiking briefly to a big gain and then losing it all as Fed Chair Jerome Powell made his remarks. Stocks have pulled back recently, shaving off some of their strong start to the year after rallying on hopes that the economy could avoid a severe recession and that cooling inflation could get the Federal Reserve to take it easier on interest rates.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

NEW YORK (AP) — Stocks are drifting on Wall Street Tuesday amid uncertainty in the market about where interest rates and inflation are heading.

The S&P 500 was 0.1% higher in quiet midday trading. The Dow Jones Industrial Average was down 75 points, or 0.2%, at 33,817, as of 11:35 a.m. Eastern time, while the Nasdaq composite was 0.4% higher.

Stocks have pulled back recently, shaving off some of their strong start to the year. The market had rallied powerfully on hopes that the economy could avoid a severe recession and that cooling inflation could get the Federal Reserve to take it easier on interest rates.

But a joltingly strong jobs report on Friday raised concerns the Fed may end up keeping rates higher for longer, as it's been warning. Higher rates can drive down inflation but also hurt the economy and investment prices.

More clues may be arriving in the afternoon about where interest rates are heading. Fed Chair Jerome Powell is set to speak at the Economic Club of Washington, D.C.

After pulling its key overnight rate all the way to a range of 4.50% to 4.75%, up from virtually zero a year ago, the Fed has said it envisions a couple more increases before holding steady through the end of the year.

Friday’s stunningly strong jobs report means Wall Street is raising its forecast for how high the Fed will take rates by the summer, closer to what the Fed has been saying. Investors are also reducing bets that the Fed may cut rates later this year. Rate cuts can goose the economy and act like steroids for markets.

Treasury yields have zoomed higher in recent days on expectations for a firmer Fed. They were holding relatively steady Tuesday

The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, slipped to 3.63% from 3.64% late Monday. The two-year yield, which moves more on expectations for the Fed, dipped to 4.43% from 4.47%. It remains near its highest level in three months.

A relatively lackluster earnings reporting season on Wall Street is also rolling on.

DuPont climbed 5.3% after reporting stronger profit for the latest quarter than analysts expected. Activision Blizzard gained 5.4% after the video-game company reported stronger revenue and profit for its latest quarter than expected.

On the losing end was Carrier Global, which dropped 4.3% despite matching analysts’ expectations for profits in the latest quarter. It also gave a forecast for revenue this upcoming year that was slightly above Wall Street’s expectations. Analysts pointed to a deceleration in orders.

In stock markets overseas, Sydney’s S&P-ASX 200 lost 0.5% after the Reserve Bank of Australia raised its benchmark rate by 0.25 percentage points to 3.35%. It said more hikes are planned to lower inflation that is at a 33-year high of 7.8% to its target range of 2% to 3%.

In Japan, the Nikkei 225 slipped less than 0.1% after the government reported wages rose 4.8% over a year earlier in December. That was close to a three-decade high as workers press for higher pay to keep pace with inflation.

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AP Business Writers Joe McDonald and Matt Ott contributed.