NEW YORK — Wall Street is holding firmer on Wednesday, and U.S. stocks are drifting between small losses and gains a day after strong reports on the economy stirred up worries that inflation and interest rates may remain higher than expected.

The S&P 500 fell 0.2% in afternoon trading following its 1.1% slump the day before. The Dow Jones Industrial Average was down 78 points, or 0.2%, as of 12:21 p.m. Eastern time, and the Nasdaq composite was 0.4% lower.

In the bond market, which has been the bigger focus for Wall Street recently, the moves were also more modest following the last month’s charge higher for yields. Higher yields hurt stocks by making it more expensive for companies and households to borrow and by pulling some investors toward bonds and away from stocks.

The increased calm returned to the market after reports on the economy Wednesday weren’t as strong as Tuesday’s. That can counterintuitively help Wall Street because it raises hopes that the Federal Reserve may keep cutting short-term interest rates. Wall Street loves lower rates, which can goose the economy and boost prices for investments.

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Fed Governor Waller’s Outlook on Interest Rates

Fed Governor Christopher Waller said in a speech Wednesday he still expects the central bank to deliver more easing of rates in 2025, pushing back against nascent speculation it may already be done after cutting three times since September.

Waller said he doesn’t expect tariffs that are possibly coming under President-elect Donald Trump to have a “significant or persistent effect” on inflation. And even though inflation has shown stubbornness recently, he still sees it trending downward over the long term.

“If the outlook evolves as I have described here, I will support continuing to cut our policy rate in 2025,” he said. “The pace of those cuts will depend on how much progress we make on inflation, while keeping the labor market from weakening.”

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Treasury Yields and Economic Reports

The yield on the two-year Treasury, which tends to closely track expectations for Fed action, fell immediately after Waller’s speech and the release of a couple economic reports. It edged down to 4.28% from 4.29% late Tuesday.

One of the reports suggested U.S. employers outside of the government slowed their hiring in December by more than economists expected. That could offer a hint of what Friday’s more comprehensive jobs report from the Labor Department will show.

That update will likely be the main event for Wall Street this week, particularly after the stock market’s closure on Thursday in observance of a National Day of Mourning for former President Jimmy Carter. The hope is that the jobs report will show enough strength to keep worries of a recession stifled but not so much that it prevents the Fed from cutting rates.

A separate report on Wednesday, meanwhile, said fewer U.S. workers applied for unemployment benefits last week than economists expected. It’s the latest signal that the job market remains remarkably solid.

The yield on the 10-year Treasury, which is the centerpiece of the bond market, held steady at 4.69% from late Tuesday. But it topped 4.70% earlier in the morning and is well above the 4.15% level it was at roughly a month ago. It was below 3.65% in September.

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Impact on Smaller Companies and Stock Market Movements

Such increases in rates make it more expensive for companies to borrow, and smaller companies can feel particular pain because of the need for many to borrow to grow. The Russell 2000 index of smaller stocks fell 1.1%.

In the stock market, eBay jumped 9.6% for the biggest gain in the S&P 500 on a collaboration with Meta Platforms where a pilot of select eBay listings will appear on Facebook Marketplace in the United States, Germany, and France.

Cal-Maine Foods climbed 2% after the egg producer reported stronger profit for the latest quarter than analysts expected. CEO Sherman Miller said it sold more dozens of eggs thanks in part to strong demand from the seasonal boost it gets leading into Thanksgiving.

Egg prices climbed late last year as a lingering outbreak of bird flu coincided with the high demand of the holiday baking season.

Delta Air Lines will report its first-quarter results on Friday, with big banks beginning next week to kick off the latest earnings reporting season in earnest.

In stock markets abroad, indexes weakened were mixed across Europe and Asia. South Korea’s Kospi climbed 1.2%, but Hong Kong’s Hang Seng fell 0.9%.