Asian equities are mixed after central bankers said interest rates should remain high

NEW YORK (AP) Wall Street is trading higher Thursday as investors consider both the positives and negatives of the latest signs that the US economy remains stronger than feared.

The S&P 500 was up 0.3% in afternoon trading after swinging between small gains and losses. The Dow Jones Industrial Average rose 215 points, or 0.6%, to 34,068 at 3 p.m. Eastern Time, and the Nasdaq composite fell 0.2%.

Bond market yields rose after the data showed the US economy grew at an annual rate of 2% much stronger than the previously estimated 1.3% in the first three months of the year. Another report said fewer employees applied for unemployment benefits last week than expecteda sign that the job market remains remarkably solid despite much higher interest rates designed to slow down the overall economy.

The US economy is currently showing real signs of resilience, said Gregory Daco, chief economist at EY. This leads many rightly question whether the long-awaited recession is really inevitable.

On the one hand, the data is positive for investors because it suggests the economy can continue to grow and support earnings for companies, which are the lifeblood of the stock market. But on the other hand, they could also mean that the Federal Reserve will find the economy strong enough to keep raising interest rates to reduce inflation.

The Fed has been raising interest rates at a breakneck pace since the beginning of last year. High rates are slowing inflation by dragging down the entire economy, and they’ve already hurt manufacturing and other industries, while contributing to three high-profile failures in the US banking system.

According to data from the CME Group, the data on Thursday has boosted expectations among traders that the Fed will hike rates two more times this year. That’s what the Fed has suggested it would do, but Wall Street has been slow to adopt. Previously it was mostly pencil in just one elevation.

The shift helped push the two-year Treasury yield to 4.89% from 4.71% at the end of Wednesday. It tends to follow expectations for Fed action.

The 10-year yield rose from 3.71% to 3.85%. It helps set rates for mortgages and other important loans.

In the stock market, banks rose to some of the biggest gains. Wells Fargo rose 4.4%, M&T Bank gained 2.1% and JPMorgan Chase climbed 3.3%.

The Federal Reserve announced this late on Wednesday the nations 23 largest banks could survive a severe recession in its latest stress test of the system. Failing the test would have prevented banks from paying dividends or buying back their own shares to send cash to shareholders.

A stronger economy could also help banks make more money from lending, although higher interest rates could also put pressure on their balance sheets.

Fed Reserve Chairman Jerome Powell warned Thursday that the central bank may need to tighten regulations of the system after several banks collapsed as rising interest rates drove down the value of bonds they bought and other investments made when interest rates were ultra-low.

Much attention has been paid to smaller and medium-sized banks as Wall Street looks for the next potential weak links in the system. Several rose Thursday to trim their big losses from earlier this year. PacWest Bancorp, for example, gained 3.4%.

Rite Aid rose 4% after reporting much stronger earnings for the last quarter than analysts had expected.

On the losing side of Wall Street was Micron Technology. It fell 3.9% for one of the biggest declines in the S&P 500 after forecasting a bigger loss for the summer than analysts had expected. That was despite the memory and storage company reporting stronger-than-expected results for the last quarter. Micron also said it thinks it has bottomed out for chip industry revenue and expects profit margins to improve.

Spice company McCormick fell 4.9% after reporting weaker-than-expected earnings for its final quarter, though earnings beat expectations. It also increased its forecast range for earnings this year, but only the top end of the range for earnings per share matched analyst expectations.

In foreign markets, indices ended mixed. Equities fell 1.2% in Shanghai and 0.6% in South Korea, while they rose 0.4% in France and 0.1% in Japan.

AP Business Writers Matt Ott, Joe McDonald, and Alex Veiga contributed.