NEW YORK — Stocks drift in mixed trading on Monday as worries about interest rates and inflation keep Wall Street buoyed up despite better-than-expected earnings reports.
The S&P 500 was up 0.2%, coming off its second straight week of losses. Like him, the other two major U.S. stock indexes also swung between small gains and losses in the first hour of trading. The Dow Jones Industrial Average rose 54 points, or 0.2%, to 34,505 as of 10:30 a.m. EST, and the Nasdaq composite rose 0.3%.
Stocks have struggled this year as the highest inflation in generations forces the Federal Reserve to flip-flop on low interest rate policies that have helped markets soar and turn the economy in recent years.
The central bank has already hiked short-term rates once, and investors expect it to raise rates to double the usual amount in a few weeks, with more likely on the way. The Fed is also preparing investors for a sharp reversal in its massive effort to keep long-term rates low.
This has the effect of bringing the 10-year Treasury yield closer to its highest level since 2018, at 2.83% on Monday morning. Higher yields put downward pressure on all sorts of investments, from gold to cryptocurrencies, and stocks considered the most expensive tend to be hit the hardest.
This shines a light on big tech and high-growth stocks, the ones that have screamed the most during the pandemic. The Nasdaq, home to many such stocks, has lagged significantly behind the rest of the market this year. Small stocks also struggled on Monday, with the Russell 2000 Index down 0.6%.
A counterweight that was a boost following better than expected earnings reports. Synchrony Financial jumped 3.8% after saying it gained more in the first three months of the year than Wall Street had expected. It also increased its dividend and plans to buy back its own shares.
Bank of America rose 2.5% after reporting earnings that were higher than analysts expected.
They are among the first companies to tell investors how much they have earned at the start of 2022, and expectations are relatively muted. Analysts predict growth of about 5% for S&P 500 companies, the slowest since the end of 2020, according to FactSet. This is largely due to the difficulty of sustaining earnings growth at such a high rate after a year of over 30% growth.
But inflation could also lead to lower profits after a year in which big companies managed to pass on almost all their price increases to their customers.
Energy producers continue to be the big winners from inflation, as the prices of the oil and natural gas they sell continue to rise. Natural gas jumped again on Monday, with the U.S. price up 6.4% and near its highest level since 2008. The war in Ukraine is driving up demand for U.S. gas as European customers try to turn away Russian supplies.
That sent S&P 500 energy stocks up 0.8%, tied for the biggest gain among the 11 sectors that make up the index.
Shares of Twitter, meanwhile, rebounded in first trading after the company announced a plan to make it harder for someone to take over the company. Tesla CEO Elon Musk has said he wants to buy the social media platform and take it private, but the company has made it difficult for him to get more than a 15% stake. Twitter shares recently rose 2.5%.
The COVID-19 pandemic also persists, perhaps most obviously in China. The world’s second-largest economy grew at an annual rate of 4.8% in the first three months of the year as authorities ordered shutdowns in Shanghai and elsewhere to stem coronavirus outbreaks.
Shares in Shanghai fell 0.5% and Asian markets were relatively weak. Japan’s Nikkei 225 lost 1.1% and South Korea’s Kospi fell 0.1%.
Meanwhile, markets elsewhere in Asia and across much of Europe have been closed for the holidays.
As trade resumed in some global markets on Monday, attention focused on Ukraine, where Ukrainian fighters were resisting capture of their shattered city of Mariupol after a 7-week siege, ignoring an ultimatum to surrender or death of Russia.
The fall of Mariupol would be Moscow’s biggest victory in the war and free up troops to take part in a potentially decisive battle for control of Ukraine’s industrial east.
Ukraine was sending top officials to Washington for this week’s spring meetings of the International Monetary Fund and the World Bank amid dire warnings about the impact of the Russian invasion on the global economy.
A World Bank official said on Friday that Ukraine’s prime minister, finance minister and central bank governor were coming. The official spoke on condition of anonymity because the visit had not been officially announced.
The conflict has pushed up the prices of oil and other commodities, making it harder for policymakers trying to recover from the pandemic while curbing inflation that is at 40-year highs in many countries.
AP Business Writers Elaine Kurtenbach and Joe McDonald contributed.