Stocks slump 3% as worries grow over higher interest rates

FILE - The New York Stock Exchange logo adorn trading posts, on the floor, Wednesday, March 16, 2022. Stocks are opening lower on Wall Street Thursday, May 5, giving up some of the big gains they made a day earlier. Technology companies were leading the declines. (AP Photo/Richard Drew, File)

Stocks are closing sharply lower on Wall Street as worries grow in markets that the higher interest rates the Federal Reserve is using in its fight against inflation will slow the economy. The S&P 500 pulled back 3.6%, erasing a rally from a day earlier and marking its biggest loss in almost two years. The Dow fell 1,063 points, or 3.1%. Tech stocks fell the most, pulling the Nasdaq down 5%. The yield on the 10-year Treasury note rose to 3.04%. Rising yields are sure to put upward pressure on mortgage rates, which are already at their higest level since 2009.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

Stocks are slumping on Wall Street, erasing a rally from a day earlier, as markets assess the looming fallout from the Federal Reserve’s stepped-up fight against inflation.

On Wednesday, the Fed raised its benchmark interest rate by half a percentage point as part of an effort to slow consumer borrowing and tamp down inflation, which is at a four-decade high. The market rallied when Fed Chair Jerome Powell dismissed the possibility the Fed could resort to a more aggressive three-quarters point hike in the future.

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