Dow gains, S&P dips as market weighs Fed rate hikes

STORY: The Dow rose and the S&P 500 ended lower in choppy trade on Friday, as beaten-down bank shares gained…

and investors grappled with how to deal with an economy that could skid as the Federal Reserve moves to aggressively tackle inflation.

The yield on the benchmark 10-year U.S. Treasury note hit a three-year high of 2.73%, helping boost the S&P banking index, which rose over 1% after slumping to 13-month lows on Thursday.

Rate-sensitive lenders JPMorgan Chase, Bank of America, Citigroup and Goldman Sachs all gained.

Overall, the Dow rose 0.4%, the S&P 500 shed 0.3% and the Nasdaq dropped 1.3%

Loreen Gilbert is Founder and CEO of WealthWise Financial Services.

“So, we're seeing the increase in the 10-year rate, and that is a response to the Federal Reserve minutes coming out and indicating, you know, both the pullback on purchases, as well as the high likelihood of a 50-basis point rate increase in May. And so, the fixed income markets have been pricing that in. And I just want to take note, that while that has been priced in the fixed income markets, it has not been priced in in the equity markets yet. And that's why we expect some more volatility to the downside on the equity markets, as the equity market start to price it in that 50-basis point rate increase.”

Shares of Tesla, Nvidia and Google parent company Alphabet fell between 1.9% and 4.5% as megacap stocks extended this week's decline as the surge in Treasury yields weighed.

Robinhood Markets fell 6.9% after a report said Goldman Sachs downgraded the online brokerage, while grocer Kroger jumped nearly 3% on a ratings upgrade.