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Inflation worries coupled with signs the Federal Reserve may extend rate hikes continued to plague Wall Street Thursday as markets ended in the red after early gains.
According to an Associated Press report, the uncertainty also drove rates on 30-year mortgages to the highest level in 2 1/2 years this week.
“Stronger than expected gains in the manufacturing and service industries – coupled with higher labor costs – ignited inflation concerns, which led to the rise in mortgage rates this week,” said Frank Nothaft, chief economist at Freddie Mac.
He said investors have begun to worry that the Federal Reserve, which has been raising interest rates to combat inflation, may not stop with just one or two more rate hikes but may actually boost rates three more times this year.
Wall Street worries that rising interest rates could make loans harder to get for consumers and businesses, slowing the economy.
“We have a very nervous investment environment,” said Al Goldman, chief market strategist at AG Edwards. “The excuse is bond rates are up and there is increased concern about the financial futures market, which appears to be predicting three more rate hike for the Fed funds.” The Fed funds rate currently stands at 4.5%.