Stock prices wobbled on Friday, after persistent pullbacks over the past week reflected how investors have grown increasingly nervous that stubbornly high inflation could push the Federal Reserve to keep interest rates high for a long time, raising the risk of a severe economic downturn.
The S&P 500 was roughly flat in early trading on Friday, setting up the index for a 2.5 percent fall for the week after declines on Monday, Tuesday and Wednesday. The index fell on eight of the past 10 full trading days.
A gauge of wholesale prices rose by more than expected on Friday, undercutting previous signs of inflation slowing down. The Producer Price Index rose 0.3 percent in November, above the 0.2 percent expected by economists. For the year through November, the index rose 7.4 percent, lower than October’s reading but still above expectations.
The fresh data added to strong jobs numbers at the end of last week and better-than-expected survey data about business at services companies, highlighting the resilience of some parts of the economy in the face of the Fed’s relentless efforts to reduce inflation through higher interest rates, which help slow economic activity by raising borrowing costs for consumers and companies.
Investors had become hopeful that some signs of slowing inflation could prompt the Fed to let up on the pace of interest rate increases, which helped push the stock market higher in recent weeks, leaving the S&P more than 10 percent above its low in October, even after this week’s decline.
Investors still expect the Fed to raise interest rates less aggressively starting at its meeting next week, but the concern is that the central bank could leave interest rates at high levels for an extended period, if inflation remains stubborn. That, in turn, raises the risk that the economy could tip into a recession.
Prices on futures contracts that track how high traders predict interest rates will rise by June next year climbed toward 5 percent this week, having fallen close to 4.9 percent by the end of last week. The yield on the 10-year Treasury bond — which underpins borrowing across the economy, from corporate bonds to mortgages — rose back above 3.5 percent this week, to 3.55 percent.
Yet there remain signs in some corners of the economy that inflation is slowing.
U.S. gasoline prices fell below year-ago levels on Thursday, down sharply from the record highs reached in the summer.
The price of West Texas Intermediate crude oil, the U.S. benchmark, also fell to its lowest level of the year on Thursday, crossing under $72 per barrel. On Friday, it rose 1.5 percent, to about $73 per barrel.