Stocks mixed as Wall Street ends a strong week; crypto fall

NEW YORK — Wall Street is largely holding on to its huge gains from the day before, with stock indexes mixed on Friday to keep them on track for a strong rally for the week.

The S&P 500 was broadly flat in midday trading after drifting between modest gains and losses. A day earlier, it rose 5.5% in its best day since spring 2020. The Dow Jones Industrial Average was down 283 points, or 0.8%, at 33,431, after rising more than 1,200 points a day earlier , while the Nasdaq composite was 0.4% higher, as of 11:30 a.m. ET.

Markets got a boost after China eased some of its strict anti-COVID measures, which have hurt the world’s second-largest economy. Hopes of more economic growth from China helped not only stocks but also oil prices to rise, with US crude rising 2.8% to $88.87 a barrel.

Thursday’s huge rally for Wall Street came after a report showed U.S. inflation eased more than expected last month. That raised hopes that the worst of inflation may finally have passed and that the Federal Reserve may take a less aggressive path to raising interest rates, although economists warned that high inflation may remain more persistent than expected on the way down.

Increases in such rates can lead to a recession and drag share prices down. They have been the main reason for Wall Street’s struggle this year.

Perhaps as important as how bad inflation is at the moment is how high US households see it being in the years ahead. That’s because too high expectations can trigger a vicious cycle where people speed up purchases and make other moves that increase inflation.

The Fed has said it watches such expectations closely, and that preventing such a doom loop is one of the reasons it has been so aggressive in raising interest rates. Inflation expectations have not risen high enough to trigger panic at the Federal Reserve, and a preliminary report on Friday suggested they are not moving very much.

The median expectation for inflation in the coming year among households rose to 5.1% from 5% a month earlier, according to a University of Michigan survey. Expectations for long-term inflation have meanwhile ticked up to 3%. But that’s still within the same 2.9% to 3.1% range that they’ve been in for 15 of the past 16 months.

The Fed has already raised its key overnight rate to a range of 3.75% to 4%, up from zero initially in March. The likely scenario remains that it increases further into next year, and then rates stay at the high level for a while.

The hope for the markets is that a softening of inflation may mean the Fed will hold the line at a lower, less painful level for the markets than it otherwise would have done.

Traders are increasingly betting that the rate could top out around a range of 4.75% to 5% early next year, according to CME Group. A week ago, they saw a higher final rate as more likely, with a significant portion expecting something like 5.25% to 5.50%.

The bond markets are closed for trading in connection with Veterans Day. On Thursday, interest rates fell as investors reduced expectations of how aggressively the Fed will raise interest rates.

The S&P 500 is on track for its third weekly gain in the last four, and the 5% gain is on track to be the biggest since June.

Companies that do a lot of business in China and around the region were particularly strong on Friday after the easing of some anti-COVID restrictions. Wynn Resorts rose 6.9%, and Las Vegas Sands gained 5.7%.

Tapestry and Ralph Lauren also helped lead the S&P 500 with gains of more than 6% after both reported stronger-than-expected last-quarter profits.

On the losing side were the health institutions. Cigna fell 9.2%, and Elevance Health fell 7.4%.

In the crypto market, prices are falling again amid the industry’s latest crisis of confidence. One of the major crypto trading platforms, FTX, filed for bankruptcy protection after users began trying to withdraw their funds due to fears about its financial strength.

The exchange and its founder are under investigation by the Department of Justice and the Securities and Exchange Commission, and rivals have said FTX’s failure could undermine confidence in the entire system.

Bitcoin fell to about $16,700, down 5.8% from a day earlier, according to CoinDesk. It set the record at almost $69,000 almost exactly a year ago, and it was over $21,000 a week ago.

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AP Business Writers Joe McDonald and Matt Ott contributed.