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NEW YORK (AP) — Wall Street closed out its worst month and quarter of the year with more losses on Friday.
The S&P 500 slipped 0.3% after a gain from the morning withered, and the majority of stocks within the index sank. The Dow Jones Industrial Average fell 158 points, or 0.5%, and the Nasdaq composite edged higher by 0.1%.
Solid gains for stocks early on faded as pressure built from within the bond market. After easing earlier in the day on encouraging signals about inflation, Treasury yields got back to rising as the day progressed.
The yield on the 10-year Treasury yield returned to 4.58%, where it was late Thursday, after dipping to 4.52%. It's again near its highest level since 2007.
Treasurys are seen as some of the safest investments possible, and when they pay higher yields, investors are less likely to pay high prices for stocks and other riskier investments. That’s a big reason why the S&P 500 dropped 4.9% in September to drag what had been a big gain for the year down to 11.7%
Treasury yields have been climbing sharply as Wall Street accepts a new normal where the Federal Reserve is likely to keep interest rates high for longer. The Fed is trying to push still-high inflation down to its target, and its main tool of high interest rates does that by trying to slow the economy and hurting prices for investments.
The Fed’s main interest rate is at its highest level since 2001, and the central bank indicated last week it may cut interest rates next year by less than it earlier expected.
Friday’s economic data showed that not only was inflation a touch cooler than expected in August, so was growth in spending by U.S. consumers. That can be a positive for inflation because it means not as many dollars are pouring into purchases. That in turn could give companies less encouragement to try to raise prices further. But it may also dent what’s been a big driver keeping the U.S. economy out of a recession.
“It came to a boil during a hot summer, and the temperature is really starting to come down,” said Brian Jacobsen, chief economist at Annex Wealth Management, of spending growth by U.S. consumers. “Higher energy prices, student loan debt repayments and real disposable incomes that have been on a declining trajectory since June doesn’t bode well.”
Oil prices have jumped to their highest level in more than a year, which is pressuring the economy by raising fuel costs for everyone. A barrel of U.S. crude sank 92 cents Friday to settle at $90.79, but it's still up sharply from $70 in June. Brent crude, the international standard, also weakened.