Wall Street falls to a rare losing week

The S&P 500 fell 0.5% from its all-time high set a day earlier. The Dow Jones Industrial Average dropped 145 points, or 0.4%, and the Nasdaq composite sank 0.8%.

A report in the morning on inflation at the wholesale level gave the latest reminder that the battle against rising prices still isn’t over. Prices rose more in January than economists expected, and the numbers followed a similar report from earlier in the week that showed living costs for U.S. consumers climbed by more than forecast.

Treasury yields rose immediately after the report’s release, adding pressure onto the stock market.

The data kept the door closed on traders’ hopes that the Federal Reserve could begin cutting interest rates in March. It also discouraged bets that a Fed move to relax conditions on the economy and financial markets could come even in May.

The yield on the 10-year Treasury climbed to 4.28% from 4.24% late Thursday. The two-year Treasury yield, which more closely tracks expectations for the Fed, touched its highest level since December.

Higher rates and yields make borrowing more expensive, which put the brakes on the economy and hurt prices for investments.

Still, the recalibrated bets for cuts to rates have simply brought Wall Street’s forecasts closer to what the Federal Reserve has been outlining. Critics have been saying traders’ expectations had gone overboard in how quickly and how much the Fed could cut rates in 2024.

The wide expectation for the Fed’s next move is still for a cut to its main interest rate, which is at its highest level since 2001, as it’s said it likely will do.

“Markets are likely to take a well-deserved breather following a staggering rally since October, though the lack of emotional reaction to elevated inflation readings and shifting Fed expectations reflect the optimism of investors,” said Mark Hackett, Nationwide’s chief of investment research,

In the meantime, the hope is that the economy continues to remain solid despite the challenge of high interest rates.

A preliminary report suggested that sentiment among U.S. consumers is rising, though not by quite as much as economists hoped. That’s key because spending by consumers makes up the bulk of the economy.

In one potentially discouraging signal, the report from the University of Michigan also said that expectations for inflation in the coming 12 months ticked up to 3% in February from 2.9% in January.

If the economy does remain resilient, it would allow companies to deliver growth in profits, which can prop up stock prices.

Applied Materials climbed 6.3% after it reported stronger profit for the latest quarter than analysts expected. The company designs and manufactures systems used to fabricate semiconductor chips, and it’s benefiting from the frenzy underway for artificial-intelligence technology.

Cryptocurrency company Coinbase Global leaped 8.8% after it reported much better results for the latest quarter than forecast. Higher crypto prices helped drive more transaction revenue for the company.

On the losing end was Digital Realty, which sank 8.3%. The owner of data centers reported weaker results than expected.

All told, the S&P 500 fell 24.16 points to 5,005.57. The Dow Jones Industrial Average dropped 145.13 points to 38,627.99, and the Nasdaq composite sank 130.52 points to 15,775.65.

In stock markets abroad, indexes climbed across much of Europe and Asia.

In Japan, Tokyo’s Nikkei 225 rose 0.9% and got closer to its record high set at the end of 1989. That was just before Japan’s “bubble” economy burst as stock and real-estate prices plunged.

Japanese stocks have been rising, though Japan’s economy shrunk to become the world’s fourth-largest.