US stocks slip as investors weigh economic data, Fed policy

A trader looks over his cell phone outside the New York Stock Exchange, Wednesday, Sept. 14, 2022, in the financial district of Manhattan in New York. (AP Photo/Mary Altaffer, File)

NEW YORK (AP) — Stocks fell in afternoon trading on Wall Street Monday as investors weigh a surprisingly good economic report that highlights the Federal Reserve's difficult fight against high inflation.

The S&P 500 fell 1.6% as of 12:52 p.m. Eastern. The Dow Jones Industrial Average fell 412 points, or 1.2%, to 34,015 and the Nasdaq fell 1.7%.

The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.59% from 3.49% late Friday.

The services sector, which makes up the biggest part of the U.S. economy, showed surprising growth in November, according to the Institute for Supply Management. The report is positive for the broader economy, but it makes the Fed's fight against inflation more difficult and means the central bank will likely have to remain aggressive in order to keep pressuring inflation.

Investors are also weighing several international developments that could further unsettle a global economy that is already getting burned by stubbornly hot inflation.

Russia's ongoing invasion of Ukraine continues agitating an already volatile global energy market. U.S. crude oil prices bounced around and were down 1.8% after a group of world leaders agreed to a boycott of most Russian oil. They also committed to a price cap of $60 per barrel on Russian exports.

China is lifting some of its most severe COVID-19 restrictions following protests across major cities. That has raised hopes that disruptions to manufacturing and trade will ease.

Markets in Asia rose, while markets in Europe slipped.

Inflation, rising interest rates and the potential for recessions throughout global economies are among the biggest concerns for investors. Wall Street has been closely watching corporate announcements and government reports to get a better sense of just how much damage is being done to the economy and inflation's path ahead in 2023.

V.F. Corp., which makes Vans shoes and The North Face outdoor gear, fell 11.1% after warning investors that weak demand is crimping revenue. The company also announced the departure of its CEO.

Tesla fell 6.1% following reports that it may have to cut production in China because of weak demand.

Investors are dealing with several crosscurrents of information. Demand may be weakening in some areas of the economy, but some sectors remain resilient. Employment remains a strong area of the economy as does overall consumer spending.

Wall Street will get a weekly update on unemployment claims on Thursday. Investors will likely be more focused on the monthly report on producer prices, for November, from the government on Friday.

The Fed has been aggressively raising its benchmark interest rate in an effort to tame inflation. The strategy is intended to make borrowing more expensive and generally hit the brakes on consumer spending and the economy. The risk is that the policy could send the economy into a recession.

The Fed is in a very “hawkish, but awkward" position, said Gene Goldman, chief investment officer at Cetera Investment Management.

“All of this is playing into uncertainty,” he said.

The Fed is meeting next week and is expected to raise interest rates by a half-percentage point, which would mark an easing of sorts from a steady stream of three-quarters of a percentage point rate increases. It has raised its benchmark rate six times since March, driving it to a range of 3.75% to 4%, the highest in 15 years. Wall Street expects the benchmark rate to reach a peak range of 5% to 5.25% by the middle of 2023.

——

Elaine Kurtenbach and Matt Ott contributed to this report.