By STAN CHOE

NEW YORK (AP) — With inflation going only higher, stocks are swinging on Wall Street Thursday as expectations build that the Federal Reserve will have to get more aggressive about removing the tremendous support it’s given the economy.

The hottest inflation reading since 1982 sent the S&P 500 down 0.2% in morning trading. It also sent Treasury yields jumping, as traders built up bets the Fed may have to apply the brakes to the economy with a bigger-than-usual hike in interest rates next month. The yield on the 10-year Treasury briefly topped 2% for the first time since August 2019.

Stock prices swung after the report, which was even hotter than economists expected. At the start of trading, sharp slumps for tech stocks sent the S&P 500 down as much as 1.2%, following the usual playbook when expectations build for rising rates. But Wall Street pared its losses as oil producers and other companies that could benefit from higher inflation and interest rates gained.

The Dow Jones Industrial Average was down just 46 points, or 0.1%, at 35,722 after earlier losing as many as 288 points. The Nasdaq composite was 0.2% lower, as of 10:37 a.m. Eastern time, after coming back from a 1.9% loss.

Inflation has been building over the last year as the economy roared back from the pandemic. Supply shortages and snags in global supply chains also pushed inflation higher, and prices at the consumer level were up 7.5% last month from a year earlier.

A separate report also said fewer workers filed for unemployment last week than expected. That’s encouraging for workers, but it could add more upward pressure on inflation.

The strong jobs market and high inflation have forced the Federal Reserve to make a hard pivot, and it’s said it’s ready to begin removing the massive aid it’s poured into financial markets. Such moves to raise interest rates could rein in inflation, but they would also put downward pressure on all kinds of investments, from stocks to cryptocurrencies.

Following the inflation report’s release, traders see a better than 50% chance that the Fed will raise short-term interest rates by half a percentage point at its meeting next month, double the traditional move. A day earlier, those same traders saw just a 24% probability of such a big move, according to CME Group. Whatever its size, it would be the first increase since 2018.

In the bond market, yields were jumping most for shorter-term Treasurys. The two-year yield leaped to 1.46% from 1.36% late Wednesday, a notable move. It tends to track expectations for Fed movement.

The 10-year yield also rose, up to 1.98% from 1.93% after earlier topping 2%, but not by as much as the two-year Treasury. It tends to move more on expectations for future inflation and economic growth.

Expectations for higher rates helped send several Big Tech stocks lower, including a 1.6% drop for Microsoft That’s been the usual reaction in the market recently, a mirror image to the preceding years when ultra-low rates helped send tech stocks to the market’s biggest gains.

Helping to offset the losses were gains for companies that can actually benefit in a world with higher inflation and interest rates. Energy stocks in the S&P 500 climbed 0.9%, for example, as the price of crude oil continues to rise. Producers of raw materials rose even more.

The Walt Disney Co. jumped 5.5% after it reported a rebound in theme-park attendance last quarter and said it added more subscribers to its Disney+ streaming service than analysts expected. Both its profit and revenue for the latest quarter topped Wall Street’s forecasts.

If companies can keep growing their profits, their stock prices could continue to rise even if higher interest rates limit how much stock investors are willing to pay for each $1 of earnings.

That’s why one of the big questions on Wall Street is how companies will navigate the higher inflation sweeping the world.

At Coca-Cola Co., Chairman and CEO James Quincey said the company will likely raise some prices to offset rising transportation and commodity costs. But Quincey said the company is treading carefully.

“While it’s easy to respond to inflation by putting up the prices, there is clearly __ as there is broad-based inflation __ going to be a squeeze on real incomes in a number of countries,” Quincey said Thursday during a conference call with investors. “We do not want to lose customers.”

Coca-Cola rose 1.6% after it reported stronger profit for the latest quarter than expected.

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AP Business Writers Dee-Ann Durbin and Yuri Kageyama contributed.