Wall Street is waffling as it closes its wild, whipsaw week. More tests loom next week

An entrance to the New York Stock Exchange is shown on May 8, 2024, in New York. (AP Photo/Peter Morgan, File)

NEW YORK -

U.S. stocks are holding relatively steady on Friday at the tail end of a wild, whipsaw week for Wall Street.

The S&P 500 was up 0.2 per cent in midday trading after drifting between small gains and losses. It's coming off its best day since 2022, and it's close to erasing the last of what had been a brutal loss for the week following several sharp swings.

The Dow Jones Industrial Average was virtually unchanged, as of 11:50 a.m. Eastern time, and the Nasdaq composite was 0.1% higher. Both are also still on track for slight losses for the week.

The listless activity came even though more big U.S. companies piled on to the group that’s reported better profit for the spring than analysts expected.

Expedia Group jumped 9 per cent after delivering stronger results than forecast, though it said it saw a softening of demand in July like some other companies. Take-Two Interactive rose 2.6 per cent after the company behind the Grand Theft Auto and NBA 2K video games likewise reported a better profit than expected.

Wall Street’s relative calm followed a mixed performance for stocks worldwide, which have also been frenetic since last week because of a number of factors slamming into markets all at once. At the forefront is the value of the Japanese yen, whose sudden and sharp strengthening recently has forced hedge funds and other traders to scramble out of a popular trade en masse.

They had been borrowing Japanese yen at very low cost and then investing it elsewhere around the world, but a hike to interest rates by the Bank of Japan forced many to abandon the trade at the same time and sent global markets reeling. A promise by a top Bank of Japan official in the middle of the week not to raise rates further as long as markets are “unstable” helped stabilize the yen, but its value climbed modestly against the U.S. dollar in Friday morning trading.

Also weighing on the market have been worries about a slowing U.S. economy. A raft of weaker-than-expected reports has forced questions about whether the Federal Reserve has kept interest rates at too high of an economy-crunching level for too long in order to beat inflation. Last Friday's report showing much weaker hiring by U.S. employers than expected was the lowlight.

Such worries dragged Treasury yields lower in the bond market this week, and they fell again Friday as investors looked for safer places for their money. Expectations have also built for deeper cuts to rates coming from the Fed, starting with an anticipated easing at its next meeting next month.

The yield on the 10-year Treasury fell to 3.93 per cent from 3.99 per cent late Thursday. But it’s still well above the 3.70 per cent level that it briefly sank to on Monday, when fear was surging and investors were speculating the Fed may even have to call an emergency meeting to cut rates.

After seemingly getting the Bank of Japan to stop hiking rates for now, Wall Street’s goal “now appears to be bossing the Fed into big rate cuts,” Bank of America strategist Michael Hartnett said in a BofA Global Research report.

Reports next week could drive more swings. On Thursday will come an update on how much shoppers are spending at U.S. retailers. Households at the lower end of the income spectrum have been struggling for a while to keep up with still-rising prices, but economists expect the report to show a return to growth after a stall in retail spending during June.

Another report on Thursday will show how many U.S. workers are applying for unemployment benefits. The most recent such report raised hopes for the economy after the prior week's frightened investors.

Looming over them all will be the latest updates on inflation. A worst-case scenario would be if Tuesday’s and Wednesday’s updates on inflation show higher-than-expected rises in prices at the wholesale and consumer levels, while the week's other reports show a sharp weakening of the economy.

That would be a toxic mix for the Federal Reserve, which doesn't have a good way to fix such a mess. The central bank could lower interest rates, which would give the U.S. economy an upward push but also threaten to worsen inflation. Or it could keep its main interest rate at a two-decade high, where it's been roughly a year. That would put downward pressure on inflation but also inflict more pain on the economy.

To be sure, even though the U.S. economy is slowing, it is not in a recession. And many economists still see one as unlikely. At EY, for example, Chief Economist Gregory Daco called the sell-off in global markets following Friday's weak jobs report “disproportionate" and puts a 60 per cent probability on the economy staying strong enough to avoid a recession for the next 12 months.

A third factor that's sent markets spinning recently is increased skepticism about Wall Street's rush into artificial-intelligence technology, and how much in profit growth it will really produce.

The frenzy around AI allowed a handful of Big Tech stocks to drive the S&P 500 to dozens of all-time highs this year, even as high rates weighed on other areas of the market. But the group of stocks known as the “Magnificent Seven” lost momentum last month amid criticism investors got carried away and took their prices too high.

How this handful of stocks performs carries extra impact on the S&P 500 and other indexes because they’re by far the market’s most valuable companies. They were mostly higher Friday after Taiwan Semiconductor Manufacturing Co., a major chip producer, said its revenue in July soared nearly 45% from a year earlier. TSMC's stock that trades in the United States rose 0.7 per cent.

Nvidia, which has become the poster child for the AI trade, fell 0.5 per cent after flipping between earlier losses and gains.

AP Business Writer Matt Ott contributed.