THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.
Stocks oscillated between gains and losses on Wall Street on Wednesday, keeping the market on track for its fourth monthly loss this year.
The S&P 500 was down 0.2% at 2:45 p.m. EST. The benchmark was volatile all week and was down about 20% for the year as investors worried about inflation and rising interest rates.
The Dow Jones Industrial Average rose 74 points, or 0.2%, to 31,018 and the Nasdaq slipped 0.3%.
Shares of small companies fell sharply, signaling that investors were worried about economic growth. The Russell 2000 slipped 1.2%.
Bed bath and beyond plunged 23% after reporting a much bigger loss than analysts expected and replacing its CEO.
The government has reported that the economy contracted at an annual rate of 1.6% in the first three months of the year, its third and final estimate of GDP in the first three months of 2022. This figure was in line with previous estimates, and economists expect growth to resume later this year.
Investors are watching economic data closely as they try to gauge how much inflation is hurting consumers and businesses, while keeping tabs on the Federal Reserve’s aggressive move to raise interest rates.
The central bank is raising rates in an effort to slow economic growth enough to temper inflation, but Wall Street is wary that the Fed could go too far and push the economy into a recession. Those concerns were heightened by a series of reports showing slowing retail sales and other indicators.
Consumers were seen as resistant to rising prices earlier this year, but that sentiment has faded, said Liz Ann Sonders, chief investment strategist at Charles Schwab. The latest GDP revision shows that consumer spending, which accounts for around two-thirds of economic output, was significantly weaker than the government had previously calculated, growing at an annual rate of 1.8% instead of 3 .1% estimated in May.
“Not only is the recession the base case, but I think it may have already started,” Sonders said.
Fed Chairman Jerome Powellspeaking at a European Central Bank forum in Sintra, Portugal on Wednesday, reiterated his hope that the Fed can pull off a so-called soft landing: raise interest rates just enough to slow the economy and curbing the rise in consumer prices without causing a recession and increasing the unemployment rate.
But, he said, the path to that goal has become more difficult and there is “no guarantee” that the central bank can rein in runaway inflation without hurting the labor market.
Ongoing supply issues and a surge in demand as the pandemic waned triggered a spike in inflation. It worsened over the year as supply chain issues worsened following new lockdowns in China to help control COVID-19 cases. The Russian invasion of Ukraine in February drove up energy prices and led to record gasoline prices that ate at consumers’ pocketbooks.
Consumers have shifted spending from discretionary items like electronics to basic necessities as inflation rises. A weaker-than-expected consumer confidence reading on Tuesday revealed that continued high inflation was making Americans more pessimistic about the present and the future.
The impacts of shifting spending are front and center for investors as companies begin to report their latest financial results. Cheerios maker General Mills rose 5.6% after reporting strong financial results and giving investors encouraging guidance.
Health care and technology companies gained ground. Eli Lilly rose 1.5% and Microsoft added 1.6%. Industrial companies, retailers and energy companies fell. FedEx fell 2.2%, Target 2.1% and Exxon Mobil 3.1%.
Cruise lines were among the biggest decliners in the S&P 500. Carnival fell 14.6%, Royal Caribbean 10.2% and Norwegian Cruise Line 9.7%.
The 10-year Treasury yield fell to 3.11% from 3.20% on Tuesday evening.
Economics writer Paul Wiseman contributed.