Wall Street closed out a turbulent week of trading with a mixed but muted session Friday, as investors continued to digest the Federal Reserve's first interest-rate increase in three years and a fresh climb in Treasury yields. The Dow Jones Industrial Average slipped 95.40 points, or 0.18%, to 51,682.64. The S&P 500 rose 12.74 points, or 0.17%, to 7,650.50, and the Nasdaq Composite gained 104.24 points, or 0.39%, to 26,522.55.
For the week, the Dow and S&P 500 both finished lower, while the Nasdaq eked out a gain, helped by a late-week rebound in semiconductor stocks. The split reflected a market still working out how much further the Fed intends to tighten policy after Wednesday's quarter-point rate increase, which was approved on a unanimous 12-0 vote and came with signals that additional tightening could follow before year-end.
The increase marked a sharp reversal from the rate-cutting cycle the Fed pursued through much of the prior two years, when policymakers lowered borrowing costs to shore up a cooling labor market. Officials have said it was inflation's renewed persistence, rather than a change in the broader economic outlook, that prompted this week's about-face.
Treasury Yields Push Back Above 5%
The bond market registered the week's hawkish turn more directly than stocks. The yield on the benchmark 10-year Treasury climbed back above 5% Friday, rising more than 5 basis points to 5.004%, according to CNBC's market coverage. The 2-year yield, which is especially sensitive to Fed policy expectations, gained a similar amount to 4.743%, while the 30-year yield rose 4 basis points to 5.336%. Traders increased bets that the Fed will raise rates again at its October meeting.
Friday's session was complicated further by quarterly "triple witching," the simultaneous expiration of stock options, stock-index futures and stock-index options contracts, which tends to inflate trading volume and volatility as funds rebalance positions. Daily Federal Reserve interest-rate data show both short- and long-term yields have moved up in tandem since the central bank's Wednesday announcement.
Dimon Questions Whether Inflation Fight Is Won
The rate increase has intensified a debate among policymakers and executives over whether inflation is truly under control. JPMorgan Chase Chief Executive Jamie Dimon, in an interview with Yahoo Finance, said he remains unconvinced.
It's not clear to me we've slayed inflation.
Jamie Dimon, chief executive, JPMorgan Chase, in an interview with Yahoo Finance
Dimon pointed to persistent price pressures, heavy government borrowing and enormous capital demand tied to artificial intelligence, defense spending and infrastructure buildouts as reasons interest rates could stay elevated for longer than markets expect. Kansas City Fed President Jeff Schmid struck a similar note this week, saying he backed the rate increase because inflation pressures extend well beyond energy costs into a broad range of goods and services, according to Bloomberg's reporting on his remarks.
Semiconductor stocks, which had wobbled earlier in the week, closed the five-day period slightly higher. The rebound came even after Anthropic and OpenAI both issued public calls this week for a more measured pace of artificial-intelligence development — a rare note of caution from two of the industry's most prominent AI labs that briefly unsettled chip stocks before buyers stepped back in.
Elsewhere in markets, crude oil extended a pullback that began earlier in the week, as easing concerns over Saudi Arabia's pipeline-damaged export capacity offset lingering Middle East risk and offered consumers a partial counterweight to higher borrowing costs. Bitcoin, meanwhile, surged more than 4% to trade above $81,000, aided by short-covering and a broader risk-on mood heading into the weekend.
With markets closed through the weekend, investors will look to next week's economic data for clues on whether the Fed's hawkish tilt will persist. Futures markets were pricing in roughly even odds of another quarter-point increase at the central bank's October meeting.
