Rethink on Rates Caps Bad Week on Wall Street

Investors swiftly reshuffled their portfolios this week, as they absorbed the Federal Reserve’s signals and prepared for the effects of higher interest rates for longer than they had previously thought.

Stock prices slumped, the dollar soared and bond yields crept higher after the Fed meeting on Wednesday: Despite holding rates steady, a shift in Fed policymakers’ predictions about how long they expected to hold interest rates at high levels prompted a sharp reassessment on Wall Street.

The S&P 500 index slumped lower for the third consecutive week, despite paring some of its losses on Friday with a modest gain. It ended the week down close to 3 percent, its worst weekly performance since March, after the collapse of Silicon Valley Bank.

The yields on longer-dated bonds, which serve as a gauge of the cost of corporate borrowing and can weigh on stock prices, rose to levels last seen in the buildup to the 2008 financial crisis. The 10-year Treasury yield briefly moved above 4.5 percent, its highest since September 2007, up roughly half a percentage point so far this month, a sizable move in that market.

Investors yanked nearly $18 billion from stock markets in the United States in the week through Wednesday, according to data from EPFR Global, the most in a week since late 2022, and that was before the Fed’s announcements pushed yields even higher.

The stock market’s rate-sensitive areas, such as technology stocks, have been particularly hard hit. The tech-heavy Nasdaq Composite fell 3.6 percent for the week.