Stocks turned lower in afternoon trading on Wall Street Wednesday as worries about inflation, rising interest rates and a potential recession weigh on the broader market.
The S&P 500 fell 0.3% as of 12:43 p.m. Eastern. The Dow Jones Industrial Average fell 119 points, or 0.4%., to 30,848 and the Nasdaq fell 0.2%.
Small company stocks slumped in a sign that investors were worried about economic growth. The Russell 2000 shed 1.2%.
Energy companies had some of the sharpest declines as oil prices fell. Hess slipped 4.7%.
Utilities and household goods makers held up better than the rest of the market as investors shied away from riskier sectors. Bond yields rose significantly. The yield on the 10-year Treasury, which helps set mortgage rates, jumped to 2.90% from 2.81% late Tuesday.
Delivery service DoorDash fell 7% following Amazon's announcement of a deal with rival delivery service Grubhub.
Major indexes have been swinging between sharp losses and gains on a daily, and sometimes hourly, basis. The broader market, though, is still mired in a deep slump that has dragged the S&P 500 into a bear market, over 20% below its most recent high.
Wall Street's key concern centers around the Federal Reserve's effort to rein in inflation, and the risk its plan could send the economy into a recession.
Inflation has squeezed businesses and consumers throughout the year. Its grip tightened after Russia invaded Ukraine in February and as China locked down several key cities to contain rising COVID-19 cases, which worsened supply chain problems.
Surging oil prices worsened inflation by sending gasoline prices in the U.S. to record highs. U.S. crude oil prices are still up 28% for the year, but have been slipping throughout the week in a welcome sign for the market hoping for any signal that inflation could be easing.
U.S. crude oil prices fell 2.8%. Prices on Tuesday settled below $100 a barrel for the first time since early May.
Central banks have been raising interest rates in an attempt to temper inflation. The Fed has been particularly aggressive in its shift from historically low interest rates at the height of the pandemic to unusually big rate increases now. That has raised concerns that the central bank could go too far, hitting the brakes too hard on economic growth and bringing on a recession.
Energy prices easing now could mean lower gas prices in a few weeks and could signal that inflation is peaking, along with a cooling housing market.
“This takes the pressure off the Fed,” said Katie Nixon, chief investment officer for Northern Trust Wealth Management. “If we can see gas prices go down, that will pull through to consumer sentiment and that could give the Fed the ability to at least take some of the pressure off.”
Wall Street will get another update on the Fed's thinking this afternoon when the central bank releases minutes from its most recent policy meeting.
Investors are closely monitoring economic data for clues about inflation's impact, its trajectory, and what that means for the Fed's position moving forward. A government report on job openings in May beat economists' expectations in a sign that the employment market remains healthy. A report on the U.S. services industry showed that the sector's growth slowed less than expected in June.
Wall Street will be closely watching the U.S. government's release of employment data for June on Friday.
European markets closed broadly higher.
The euro is at a 20-year low to the dollar on worries over disruptions to energy supplies. European Commission chief Ursula von der Leyen said the 27-nation European Union needs to make emergency plans to prepare for a complete cut-off of Russian gas amid the Kremlin’s war on Ukraine.
Updated July 6, 2022 at 1:05 p.m. ET with new information.