Stocks rise on Wall Street, trimming their weekly losses

The Dow Jones Industrial Average rose 293 points, or 0.8%, to 34,455 and is now in the green for the week after three weeks of losses.

Bond yields edged lower. The yield on the 10-year Treasury fell to 1.77% from 1.81% late Thursday.

The S&P 500 is still on track for its fourth weekly loss in a row and the Nasdaq is headed for its fifth straight weekly loss. Broad weekly losses like this haven’t hit the market since September 2020.

The Dow Jones Industrial Average is now in the green for the week after three weeks of losses.

Stocks went on a wild rise this week as investors tried to gauge how the Federal Reserve will move ahead with easing its historic support for markets and the economy. Major indexes spent much of the week swinging sharply from big gains to deep losses and vice versa.

Investors expect the Fed to start raising interest rates in March and now expect five or more hikes of a quarter point each as the most likely path for the central bank this year. The sentiment follows the latest Fed statement and comments from Chair Jerome Powell that inflation is “slightly worse” than it was in December. The Fed also plans to phase out its bond purchases in March and is likely to start reducing the size of its balance sheet at some point, a move that has a similar effect as an increase in rates.

The Fed has been the biggest driver for much of the market’s volatility, said Liz Ann Sonders, chief investment strategist at Charles Schwab. There is likely going to be more volatility ahead as investors closely watch the impact of interest rate increases on the broader economy and the financial markets.

“I don’t think we’re out of the woods yet in terms of this kind of frenzied market behavior,” Sonders said.

Investors expect the first rate hikes to come in March.

Powell has acknowledged that the high inflation that is squeezing businesses and consumers isn’t loosening its grip and that could force the Fed to act more aggressively about raising interest rates.

The latest round of corporate earnings has shown that companies are still feeling the pinch of supply chain problems, raw material costs and other pressures from inflation.

Oreo cookie maker Mondelez fell 2.6% after issuing its latest warning about inflation hurting operations in North America. KLA, which makes equipment for chipmakers, fell 0.8% and computer hard drive maker Western Digital fell 9.1% after giving similarly disappointing updates on pressure from inflation.

Additional government reports are also showing that consumers are facing higher prices and they might be discouraging spending. A measure of prices that is closely tracked by the Fed rose 5.8% last year, the sharpest increase since 1982. The report from the Commerce Department also said that consumer spending fell 0.6% in December, with purchases of cars, electronics, and clothes declining.

Inflation concerns and worries about the impact of rising interest rates converged this week with worries about a potential conflict between Ukraine and Russia that could raise energy prices. A conflict could also distract nations from focusing on the lingering virus pandemic, which continues to threaten economic growth with each wave spiking COVID-19 cases.