Wall Street's rally slows, stocks mixed after data deluge

The New York Stock Exchange on Wednesday, June 29, 2022 in New York. Stocks are opening mostly lower on Wall Street, Thursday, July 21, as traders look over some mixed news on company earnings. (AP Photo/Julia Nikhinson, File)

NEW YORK (AP) — Stocks are making tentative moves on Wall Street and are mixed on Thursday following a deluge of news about the economy, interest rates and corporate profits.

The S&P 500 was virtually unchanged in midday trading after two days of strong gains had brought it back to its highest level in nearly six weeks. The Dow Jones Industrial Average was down 146 points, or 0.5%, at 31,728, as of 11:05 a.m. Eastern time, and the Nasdaq composite was 0.2% higher.

Much of the market's focus was on Europe, where a yearslong experiment with negative interest rates came to a close. In the United States, reports showed the economy is slowing more than expected, while big companies delivered a mixed set of profit reports. Stocks also briefly lost ground after President Joe Biden tested positive for COVID, but only by a bit.

At the center of this year’s sell-off for financial markets has been the world’s punishingly high inflation, and the moves made by central banks to squash it. On Thursday, the European Central Bank surprised markets when it raised interest rates by more than expected, its first increase in 11 years.

As with the U.S. Federal Reserve, which is set to raise rates next week for a fourth time this year, the hope is that higher rates will slow the economy enough to beat back high inflation. The risk is that higher rates push down on investment prices, and too-aggressive hikes could cause a recession.

In the U.S., some areas of the economy have already begun to soften.

The highest number of workers filed for unemployment benefits last week in eight months, though it remains low compared with history. A separate report released Thursday morning showed manufacturing in the mid-Atlantic region weakened by significantly more than economists expected.

The discouraging data helped pull Treasury yields lower and could steer the Federal Reserve toward less aggressive hikes on interest rates. That in turn could help support stocks.

The two-year Treasury yield, which tends to move with expectations for the Fed, slumped to 3.16% from 3.25% late Wednesday. The 10-year yield, which influences mortgage rates, fell to 2.94% from 3.03%.

The primary reason stocks have rallied this week on Wall Street has been strong profit reports from big U.S. companies. If they continue to deliver strong earnings despite high inflation, that would prop up one of the two main levers that set stock prices. The other depends on where interest rates go.

Tesla climbed 6.2% in the first trading after the electric-vehicle maker reported results for the spring that were better than analysts expected.

Philip Morris International, the tobacco company, jumped 5.3% after reporting stronger profit than expected. Steelmaker Nucor gained 3.5% after its results likewise topped forecasts.

On the losing side were airlines following some disappointing reports.

United Airlines tumbled 9.7% after its profit and revenue fell short of expectations. It also scaled back its plans for growth later this year. American Airlines fell 8.9% after it reported weaker earnings than expected, though its revenue topped forecasts.

Alaska Air got caught in the downdraft, and its shares fell 2.1% despite reporting stronger results than expected.

AT&T sank 9% even though it also reported better profit and revenue than Wall Street forecast. It cut its forecast for the amount of cash it will generate this year.

European stocks were mostly lower, with several events keeping the continent in the market's spotlight beyond the European Central Bank's momentous moves.

A key pipeline carrying natural gas into the region reopened Thursday, though worries continue that Russia may restrict supplies to punish allies of Ukraine. In Italy, Premier Mario Draghi resigned after his ruling coalition fell apart. That adds more uncertainty as Europe contends with the war in Ukraine, high inflation and the potential for trouble in Europe's bond markets.

In Asia, Tokyo’s Nikkei 225 rose 0.4% after the Bank of Japan announced no major policy changes after a two-day meeting, as was widely expected. It's been a holdout in the global rush to raise interest rates.

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AP Business Writer Yuri Kageyama contributed.