By Stan Choe
Wall Street drifted to a lower close but still marked its best week since March. The S&P 500 fell 0.1% Friday. The Dow lost 109 points, or 0.3%, and Nasdaq composite slipped 0.2%. Worries about talks in Washington to avert a debt default by the U.S. government helped cause stocks to slip. The S&P 500 broke out of a listless stretch where it failed to move by 1%, up or down, for six straight weeks. Traders took comments by Federal Reserve Chair Jerome Powell to mean the end to hikes to interest rates may arrive next month, as hoped.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
Wall Street is drifting lower Friday, but it's still heading for its best week since March.
The S&P 500 was 0.1% lower in late trading. The Dow Jones Industrial Average was down 82 points, or 0.2%, at 33,454, as of 3 p.m. Eastern time, while the Nasdaq composite was 0.3% lower.
Despite its weak Friday, the S&P 500 is still on track to break out of a long, listless stretch where it failed to move by 1%, up or down, for six straight weeks. It’s up 1.6% so far this week. Much of the strength has been due to rising hopes that Washington can avoid a potentially disastrous default on its debt.
Democrats and Republicans are facing down a June 1 deadline, which is when the U.S. government could run out of cash to pay its bills, unless Congress allows it to borrow more. A default on its debt would likely mean a recession for the economy, and economists and investors both widely expect a deal to be made.
But some of the hope ebbed Friday after a top negotiator for House Speaker Kevin McCarthy said it’s time to “ press pause ” on talks. That helped cause the S&P 500 to flip from modest gains in midday trading to losses. It's the latest flick in the tug of war that's dominated Wall Street for weeks.
“Every single day, the market is just a back and forth on recession or no recession,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management. “That’s why we’ve been in this range bound area. Some people believe we are heading for or are in a recession, like I believe, and some don’t.”
A default on the U.S. debt would almost surely cause a recession. But helping to counterbalance those worries on Friday were hopes that the Federal Reserve may soon take it easier on its hikes to interest rates. That, in contrast, could ease the pressure on an already slowing econmoy.
Fed Chair Jerome Powell hinted the Fed may leave interest rates alone at its next meeting in June. That would be the first time it's done so in more than a year after raising rates at a furious pace in hopes of driving down inflation.
High rates have helped inflation cool from its peak last summer. But they do that by hurting the economy broadly and dragging down prices of stocks, bonds and other investments. Manufacturing and other areas of the economy have already shown weakness under the weight of higher interest rates.
Treasury yields gave up some of their gains from earlier in the day after Powell spoke, as traders ratcheted back bets for another Fed rate hike in June.
The yield on the 10-year Treasury rose to 3.69% from 3.65% late Thursday. That yield helps set rates for mortgages and other important loans.
The two-year Treasury yield, which moves more on expectations for Fed action, rose as high as 4.33% before Powell began speaking. It later fell back to 4.28%, up from 4.26% late Thursday.
Just a day earlier, traders were upping bets for a Fed hike in June. That was after Dallas Fed President Lorie Logan suggested another hike may be on the way unless more data arrives to suggest further cooling of inflation, which remains well above the Fed’s target.
DXC Technology rose 2.7% for one of the bigger gains in the S&P 500 after offering a mixed earnings report.
Its revenue for the latest quarter fell shy of forecasts, but it also announced a new $1 billion program to buy back its own stock. Such purchases can goose a company's earnings per share.
On the losing side was Foot Locker, which tumbled 27.4%. It lowered its financial forecast for the year because it’s having to mark down prices to get shoppers to buy amid what it calls a tough economic environment.
Another retailer, Ross Stores, fell 1.1% after giving a forecasted range for earnings this full year that fell short of some analysts’ projections. That was despite its sales and revenue for the latest quarter topping Wall Street's expectations.
Much scrutiny has been on retailers this week, which also saw Home Depot, Target and Walmart report mixed results. That’s because resilient spending by U.S. households has been one of the main pillars keeping the economy from falling into a recession.
Deere also topped forecasts for revenue and earnings in the latest quarter, but its stock swung from an early gain to a drop. Its stock was most recently down 1.8%.
Unlike many companies on Wall Street, Deere is seeing its profit and revenue grow from year-ago levels. The majority of companies have been reporting stronger earnings for the start of the year than analysts expected. But those in the S&P 500 are still on track to report a second straight quarter of profit declines from year-ago levels.
Japan's Nikkei 225 rose 0.8% to its highest close in about 33 years. Data on Japan’s consumer price index for April showed a rise of 3.4% from the previous year, indicating inflationary pressures were subsiding.
Chinese stocks struggled. Hong Kong's Hang Seng fell 1.4% and Shanghai's index slipped 0.4%. Indexes were higher across Europe.
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AP Business Writers Yuri Kageyama and Matt Ott, and AP Economics Writer Christopher Rugaber, contributed.
