Wall Street drifts as rate worries offset strong profits

The New York Stock Exchange is seen in New York on Thursday, Feb. 24, 2022. Stocks are mixed in the early going on Wall Street Monday, April 18, 2022, as traders get back to work after a holiday weekend. (AP Photo/Seth Wenig, File)

NEW YORK (AP) — Stocks are drifting in mixed trading Monday, as worries about interest rates and inflation keep a lid on Wall Street despite some better-than-expected profit reports.

The S&P 500 was 0.1% lower, coming off its second straight week of losses. The Dow Jones Industrial Average was up 54 points, or 0.2%, at 34,505, as of 9:55 a.m. Eastern time, and the Nasdaq composite was 0.5% lower. All three indexes flipped between small gains and losses within the first half hour of trading.

Stocks have struggled this year as the highest inflation in generations forces the Federal Reserve into a U-turn on the low-interest-rate policies that helped markets soar and the economy to rev in recent years.

The central bank has already raised short-term rates once, and investors are expecting it to raise rates by double the usual amount in a couple weeks, with more likely on the way. The Fed is also preparing investors for a sharp reversal in its massive efforts to keep longer-term rates low.

That has the 10-year Treasury yield close to its highest level since 2018, at 2.82% on Monday morning. Higher yields put downward pressure on all kinds of investments, from gold to cryptocurrencies, and the stocks seen as the most expensive tend to get hit hardest.

That puts the spotlight on big technology and high-growth stocks, the ones that screamed highest through the pandemic. The Nasdaq, home to many such stocks, has lagged behind the rest of the market. Smaller stocks also struggled Monday, with the Russell 2000 index down 0.5%.

Counterbalancing that was some encouragement following better-than-expected profit reports. Synchrony Financial jumped 5% after it said it earned more in the first three months of the year than Wall Street expected. It also boosted its dividend and plan to buy back its own stock.

Bank of America rose 2.6% after reporting stronger profits than analysts forecast.

They're among the first companies to tell investors how much they earned at the start of 2022, and expectations are relatively subdued. Analysts are forecasting roughly 5% growth for S&P 500 companies, the slowest since the end of 2020, according to FactSet. Much of that is because it's difficult to keep growing profits at such a high pace following a year of better than 30% growth.

But inflation may also be pulling down profits at big companies after a year of successfully passing along almost all their price increases onto their customers.

Shares of Twitter, meanwhile, bounced up and down in the first trading after the company announced a plan to make it more difficult for someone to take over the company. Tesla CEO Elon Musk has said he wants to buy the social-media platform and take it private, but the company has made it tough for him to amass more than a 15% stake in it. Twitter shares were most recently up 3%.

The COVID-19 pandemic is also still hanging around, perhaps most obviously in China. The world’s second-largest economy grew at a 4.8% annual pace in the first three months of the year, as authorities ordered shutdowns in Shanghai and elsewhere to stem coronavirus outbreaks.

Stocks in Shanghai fell 0.5%, and markets across Asia were relatively weak. Japan's Nikkei 225 lost 1.1%, and South Korea's Kospi dipped 0.1%.

Markets elsewhere in Asia and across much of Europe, meanwhile, were closed for holidays.

As trading resumed Monday in some world markets, attention was focused on Ukraine, where Ukrainian fighters were holding out against a capture of their shattered city of Mariupol after a 7-week siege, ignoring a surrender-or-die ultimatum from Russia.

The fall of Mariupol would be Moscow’s biggest victory of the war and free up troops to take part in a potentially climactic battle for control of Ukraine’s industrial east.

Ukraine was sending top officials to Washington for this week’s spring meetings of the International Monetary Fund and the World Bank amid dire warnings about the impact of the Russian invasion on the global economy.

A World Bank official said Friday that Ukraine’s prime minister, finance minister and central bank governor are coming. The official spoke on condition of anonymity because the visit had not been officially announced.

The conflict has pushed prices for oil and other commodities sharply higher, compounding difficulties for policy makers trying to nurse along recoveries from the pandemic while also tamping down inflation that is at 40-year highs in many countries.

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AP Business Writers Elaine Kurtenbach and Joe McDonald contributed.