Updated at 10:31 a.m. ET
A day after dropping more than 1,000 points, the Dow rebounded Friday morning along with other indexes. Analysts cited concerns about inflation and ballooning government debt for the earlier drops.
The Dow Jones industrial average was up about 130 points, or 0.5 percent, the S&P 500 was up 21 points, or 0.8 percent, and the Nasdaq index gained 62 points, or 0.9 percent.
With Thursday’s 4 percent drop, the U.S. stock market had officially entered a correction, when major indexes are down at least 10 percent from their recent peaks.
Last Friday, the stock market began its dive after the Labor Department reported that wage growth was picking up. Average hourly wages grew 2.9 percent from a year ago — the largest increase since 2009. Yields for 10-year Treasurys hit four-year highs.
That sign of inflation has market participants worried that the Federal Reserve will increase interest rates, perhaps more aggressively than the three rate hikes already expected this year.
“Interest rates are moving higher,” NPR’s John Ydstie says. The Fed’s key rate was “near zero for years. That helped make stocks the only place you could get a decent return on your investment. Now, they’re moving higher and investors are concerned they might move higher faster.”
Also driving rates higher is the projected increase in federal debt as a result of the big tax-cutting bill passed in December as well as the two-year spending deal signed by President Trump on Friday.
As rates climb, consumers will end up paying higher interest on their credit cards, mortgages and auto loans.