Stocks hold relatively steady after worst rout in two months

NEW YORK –

Stocks are holding relatively steady on Wall Street Wednesday, firming a bit a day after falling to their worst loss since December on worries about higher interest rates.

The S&P 500 was 0.3% higher in early trading. The Dow Jones Industrial Average was up 59 points, or 0.2%, at 33,188, as of 9:45 a.m. Eastern time, while the Nasdaq composite was 0.6% higher.

After leaping at the start of the year, stocks hit a wall in February on worries that inflation is not cooling as quickly or as smoothly as hoped. That has Wall Street upping its forecasts for how high the Federal Reserve will take interest rates, as well as for how long it will keep them at that level.

High rates can help drive down inflation, but they raise the risk of a recession because they slow the economy. They also hurt investment prices.

Yields in the Treasury market have shot higher this month after several stronger-than-expected reports on the economy forced the recalibration by Wall Street, which earlier was building bets for the Fed to take it easier on interest rates soon.

The yield on the 10-year Treasury is near its highest level since November. It pulled back a bit from its surge on Tuesday, dipping to 3.92% from 3.95%. That helped take some pressure off stocks.

The two-year yield, which moves more on expectations for the Fed, fell to 4.66% from 4.73%. It’s also been near its highest level since November. If it tops that level, it would be at its highest since 2007.

Traders have in recent weeks cut way back on bets that the Fed could cut rates later this year. Now they’re in closer alignment with what Fed officials have been telling the market for months, if not preparing for even more.

Investors are penciling in at least two more rate hikes of 0.25 percentage points, with a possible third. They’re even talking about the possibility that the Fed may consider going back to increases of 0.50 points.

The Fed has brought its main overnight rate up to a range of 4.50% to 4.75%, up from virtually zero at the start of last year, in its drive to stamp out high inflation. It’s also said it envisions no cuts to rates this year.

It will release the minutes from its last policy meeting in the afternoon, which could cause more swings for markets.

Its next move on rates will be next month. Traders see a roughly three-in-four chance that the Fed will raise rates by 0.25 points, according to CME Group. They see a 24% chance of a hike of 0.50 points. A month ago, traders had some bets that the Fed could hold rates steady in March.

Diamondback Energy jumped 4.2% for one of the biggest gains on Wall Street after it reported a stronger profit for its latest quarter than analysts expected.

Big tech and high-growth stocks also were steadying themselves as falling Treasury yields lessened the pressure on the market. They’ve been hit hard this month because they’re seen as some of the most vulnerable to higher interest rates.

Amazon rose 2.1% and was the strongest single force lifting the S&P 500. Nvidia rose 1.7% ahead of its earnings report, which will arrive after trading closes for the day.

On the losing end was TJX, the parent company of T.J. Maxx, Marshalls and other stores. It dropped 1.6% after reporting weaker profit for the latest quarter than analysts expected.

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AP Business Writers Yuri Kageyama and Matt Ott contributed