Traders work on the floor at the New York Stock Exchange in New York, Friday, July 1, 2022. Stocks wavered between small gains and losses in morning trading on Wall Street Wednesday, July 6 as worries about inflation, rising interest rates and a potential recession weigh on the broader market. (AP Photo/Seth Wenig)
Stocks are mostly lower in afternoon trading on Wall Street Wednesday as worries about inflation, rising interest rates and a potential recession weigh on the broader market.
The S&P 500 slipped 0.1% as of 1:37 p.m. Eastern after having been up 0.5% in the early going. The Dow Jones Industrial Average fell 83 points, or 0.3%., to 30,883, while the Nasdaq edged up less than 0.1%.
Small company stocks slumped in a sign that investors are worried about economic growth. The Russell 2000 shed 1.1%.
Energy stocks had some of the sharpest declines as oil prices fell. Hess dropped 2.8%.
Technology and health care stocks held up better than the rest of the market. Cisco Systems rose 1.2% and Pfizer added 1.1%.
Bond yields rose significantly. The yield on the 10-year Treasury, which helps set mortgage rates, jumped to 2.90% from 2.81% late Tuesday.
Delivery service DoorDash slid 7.6% following Amazon's announcement of a deal with rival delivery service Grubhub.
Major indexes have been swinging between sharp losses and gains on a daily, and sometimes hourly, basis. The broader market, though, is still mired in a deep slump that has dragged the S&P 500 into a bear market, over 20% below its most recent high.
Wall Street's key concern centers around the Federal Reserve's effort to rein in inflation, and the risk its plan could send the economy into a recession.
Inflation has squeezed businesses and consumers throughout the year. Its grip tightened after Russia invaded Ukraine in February and as China locked down several key cities to contain rising COVID-19 cases, which worsened supply chain problems.
Surging oil prices worsened inflation by sending gasoline prices in the U.S. to record highs. The price of U.S. crude oil is still up 36% for the year, but has been slipping throughout the week in a welcome sign for a market hoping for any signal that inflation could be easing.
U.S. crude oil was down 1.3% Wednesday afternoon. The price on Tuesday settled below $100 a barrel for the first time since early May.
Central banks have been raising interest rates in an attempt to temper inflation. The Fed has been particularly aggressive in its shift from historically low interest rates at the height of the pandemic to unusually big rate increases now. That has raised concerns that the central bank could go too far, hitting the brakes too hard on economic growth and bringing on a recession.
Energy prices easing now could mean lower gas prices in a few weeks and could signal that inflation is peaking, along with a cooling housing market.
“This takes the pressure off the Fed,” said Katie Nixon, chief investment officer for Northern Trust Wealth Management. “If we can see gas prices go down, that will pull through to consumer sentiment and that could give the Fed the ability to at least take some of the pressure off.”
Wall Street will get another update on the Fed's thinking this afternoon when the central bank releases minutes from its most recent policy meeting.
Investors are closely monitoring economic data for clues about inflation's impact, its trajectory, and what that means for the Fed's position moving forward. A government report on job openings in May beat economists' expectations in a sign that the employment market remains healthy. A report on the U.S. services industry showed that the sector's growth slowed less than expected in June.
Wall Street will be closely watching the U.S. government's release of employment data for June on Friday.
European markets closed broadly higher.
The euro is at a 20-year low to the dollar on worries over disruptions to energy supplies. European Commission chief Ursula von der Leyen said the 27-nation European Union needs to make emergency plans to prepare for a complete cut-off of Russian gas amid the Kremlin’s war on Ukraine.
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When inflation rises, it's not difficult to notice higher prices. But you don't have to be very old to understand the expression that a dollar doesn't buy as much as it used to. The Happy Meal was introduced in 1979 for a price of $1.10. Today, that same meal costs $2.99. Yet, it remains one of the restaurant chain's most popular items. It's also a barometer for the economy because of its convenience for parents.
And consider the iPhone which costs 81% more in 2022 than the initial model that launched in 2007. Yet despite the increase in price, consumers are willing to pay whatever is required.
The key to both of these examples, and others like them, is pricing power. A company that has the ability to raise its prices can maintain its profit margins. That means it delivers consistent results regardless of what's happening in the broader economy. In good times, this may be taken for granted. But when the economy slows down, that consistency stands out.
In this special presentation, we're looking at seven companies with significant pricing power at all times, particularly with inflation currently running at 40-year highs.
View the "7 Stocks with the Pricing Power to Push Through High Inflation".