Wall Street is losing ground, extending a recent streak of losses

Stocks fell during afternoon trading on Wall Street Monday as investors braced for higher interest rates from central banks to fight inflation.

The S&P 500 was down 0.8% as of 1:52 p.m. Eastern. The Dow Jones Industrial Average fell 179 points, or 0.5%, to 32,740 and the Nasdaq fell 1.3%. Small company shares also fell. The Russell 2000 fell 1.2%.

Every major index comes after two weeks of loss. Markets are collapsing as hopes of a softer Federal Reserve fade amid stubbornly hot inflation. The central bank last week raised its forecast of how long interest rates must remain high to cool inflation that is hurting businesses and threatening spending. The European Central Bank also warned that more rate hikes are imminent.

Technology companies and retailers were among the biggest losers. Microsoft was down 2% and Home Depot was down 1.8%.

Facebook’s parent company fell 3.7% after the European Union impeached the company of violating antitrust rules by distorting competition in online classified advertising.

The price of crude oil in the US increased by 1.8%. European markets gained ground and Asian markets closed lower overnight.

Treasury yields gained ground. The yield on the 10-year Treasury bond, which affects mortgage rates, rose to 3.58% from 3.49% late Friday.

Investors have several economic reports available this week as they try to determine the sustained path of inflation.

The National Association of Realtors will release US home sales data for November on Wednesday. Home sales have fallen, but housing prices have remained strong.

The Conference Board will publish its consumer confidence report for December on Wednesday. Consumer confidence and spending have been another strong point of the economy, but inflation is starting to put increasing pressure on consumers.

The government is releasing a closely monitored monthly snapshot of consumer spending, the personal consumer spending price index for November, on Friday. The report is monitored by the Fed as a barometer of inflation.

The Fed concluded its last meeting of the year last week with a half-percentage point hike in short-term interest rates, the seventh consecutive hike this year. More importantly, it was a signal that it may need to maintain high interest rates for longer than Wall Street expected to contain inflation.

The federal funds rate is between 4.25% and 4.5%, the highest level in 15 years. Fed policymakers predict that central bank interest rates will reach a range of 5% to 5.25% by the end of 2023. Their forecast does not call for a rate cut before 2024.

Inflation is showing signs of easing, but at a relatively low pace. The Fed’s aggressive policy threatens to put the brakes on the economy too hard, while at the same time economic growth is already slowing due to the pressure of inflation. That could result in a recession, which analysts expect in some form in 2023, although its severity and duration are hard to predict.