Stocks stem losses but still close out worst week since March 2020

Investors got some relief Friday after a brutal turn of losses, but Wall Street still closed out its worst week since the chaotic early days of the coronavirus pandemic, as the Federal Reserve’s aggressive push to tame inflation — and the danger of sparking a recession — began to settle in.

The Dow Jones Industrial fell 38 points, or 0.1 percent, a day after the blue-chip index dropped below 30,000 for the first time since January 2021. The S&P 500 rose 8 points or 0.2 percent, while the tech-heavy Nasdaq climbed 152 points or 1.4 percent.

Investors are still grappling with the Fed’s momentous decision to raise interest rates by three-quarters of a percentage point. The move has far-reaching consequences for consumers, because it makes it more expensive to borrow money and carry a credit card balance.

New data released Wednesday also pointed to a bumpier road ahead, complete with higher unemployment, slower economic growth and record-high prices that will take longer to come back down.

Mortgages, for example, got significantly more expensive this week: A 30-year fixed-rate mortgage hit 5.78 percent this week, according to Freddie Mac. Just a week ago it was 5.23, notching the biggest one-week jump since 1987.

“The housing market isn’t crashing, but it is experiencing a hangover as it comes down from an unsustainable high,” said Redfin deputy chief economist Taylor Marr, in a blog post Thursday.

“Housing demand has already cooled significantly to the point that the industry has begun facing layoffs. This week’s rate hikes will further stretch home buyers’ budgets to the point that many more may be priced out,” he said.

Rates have nearly doubled in recent months: A 30-year fixed-rate loan, the most popular option, was close to 3 percent in November. The difference would raise the monthly mortgage on a $500,000 home by roughly $700, a Washington Post analysis shows. Over the life of the loan, the rate increase tacks on an additional $256,000 in payments, or more than half the price of the home.

The U.S. median home price was $391,200, according to the latest data from the National Association of Realtors, published last month.

“While a lot of home sellers are already dropping their prices, more homeowners will likely decide to stay put now that the mortgage rate on a new home is significantly higher than their current one,” said Redfin’s Marr.

Americans brave enough to glance at their 401(k)s or other investment accounts were probably met with some ugly math. Portfolios spanning nearly every sector have suffered declines, and color coded grids showing the wins and losses of stocks flashed a solid wall of red. The S&P 500, a key benchmark for measuring financial performance over time, has lost nearly a quarter of its value this year.