US stocks waver as Fed chief addresses Congress again

An NYSE sign is seen on the floor at the New York Stock Exchange in New York, Wednesday, June 15, 2022. Stocks are opening higher on Wall Street Thursday, June 23. The Labor Department said fewer Americans applied for jobless benefits last week as the U.S. job market remains robust. (AP Photo/Seth Wenig)

NEW YORK (AP) — Stocks gave up an early gain and turned mixed in afternoon trading on Wall Street Thursday as investors remain focused on inflation and rising interest rates.

The S&P 500 was up 0.1% as of 2:23 p.m. Eastern. It was up as much as 1% earlier. The Dow Jones Industrial Average fell 78 points, or 0.2%, to 30,410 and the Nasdaq rose 0.6%.

Major indexes are still on track for weekly gains. Trading has been turbulent in recent weeks, and the benchmark S&P 500 has fallen for 10 of the last 11 weeks. Stocks have swung between sharp gains and losses as investors try to determine whether a recession is looming.

The Federal Reserve is attempting to temper inflation's impact with higher interest rates, but Wall Street is worried that it could go too far in slowing economic growth and actually bring on a recession.

Investors monitored Fed Chair Jerome Powell's second day of testimony to Congress Thursday. He testified to a House committee, a day after testifying to a Senate committee.

Powell again stressed that the Fed hopes to rein in inflation without knocking the economy into a recession but acknowledged “that path has gotten more and more challenging.”

He also acknowledged that the Fed’s tools to combat inflation are blunt and risk causing damage to the economy.

Powell has previously acknowledged that a recession is ”certainly a possibility" and that the central bank is facing a more challenging task amid the war in Ukraine essentially pushing oil and other commodity prices even higher and making inflation even more pervasive.

On Thursday, Powell stressed: “I don’t think that a recession is inevitable.”

Encouragingly for the Fed, many households and businesses still seem to expect inflation to eventually come back down. If that were to change, it could spark a self-fulfilling vicious cycle that only worsens inflation.

“Our whole framework is about keeping inflation expectations well and truly anchored,” he said Thursday. Powell emphasized the importance of getting inflation down to the Fed’s goal of 2%. “We can’t fail on this,” he said.

Powell spoke to Congress a week after the Fed raised its benchmark interest rate by three quarters of a percentage point, its biggest hike in nearly three decades. Fed policymakers also forecast a more accelerated pace of rate hikes this year and next than they had predicted three months ago, with its key rate to reach 3.8% by the end of 2023. That would be its highest level in 15 years.

Earlier Thursday the Labor Department said fewer Americans applied for jobless benefits last week, though it was slightly more than economists expected. The solid job market is a relatively bright point in an otherwise weakening economy, with consumer sentiment and retail sales showing increasing damage from inflation.

Companies are signaling slower-than-expected growth, however, according to surveys from IHS Markit. While weak economic data is discouraging for the broader economy, it could also mean that the economy is already slowing enough to allow the Fed to ease up on its planned rate hikes.

Inflation remains stubbornly high, squeezing consumers with higher prices on everything from food to clothing. That has pressured people to shift spending from big ticket items like electronics to necessities. The pressure has been worsened by record-high gasoline prices that show no sign of abating amid a supply and demand disconnect.

Big technology and health care companies did much of the heavy lifting. Microsoft rose 1.7% and Johnson & Johnson rose 1.9%. Energy stocks fell as oil prices slipped. Valero fell 8.8%.

Bond yields fell significantly. The yield on the 10-year Treasury note, which helps set mortgage rates, fell to 3.06% from 3.15% late Wednesday.

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AP Business Writer Stan Choe contributed. Veiga reported from Los Angeles.