Stocks fall, dragging Wall Street into yet another bearish week

Stocks fall, dragging Wall Street into yet another bearish week

Wall Street is headed for another day of losses on Friday as the Federal Reserve’s last increase in interest rates renews recession fears.

The S&P 500 was down 62 points at 3,696, or 1.7%, as of 10:20 a.m. ET. EST on Friday. The Dow Jones Industrial Average fell 338 points, or 1.3%, to 29,699 and the Nasdaq fell nearly 2%. Barring a wild swing, the major US indexes are poised to end the week with losses for the fourth time in five weeks.

Oil prices fell 3%, threatening to fall below $80 a barrel for the first time since early January.


The Federal Reserve raises the key interest rate again

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Fears of a global recession

Central banks in Britain, Switzerland, Turkey and the Philippines all raised interest rates after The Fed raised its key interest rate on Wednesday for the fifth time this year and indicated that more hikes are on the way.

“Global stocks are struggling as people expect rising interest rates to trigger a much earlier and possibly severe global recession,” Oanda’s Edward Moya said in a report.

Investors worry that central banks may be willing to tolerate a painful economic downturn to bring prices under control.

Some point to signs that the U.S. economy is cooling as it backs the Fed to pull back plans for more rate hikes. But Chairman Jerome Powell said Wednesday that interest rates will remain high for a long time if needed to bring inflation back to the 2 percent target.

US consumer inflation fell to 8.3% in August from a peak of 9.1% the previous month, although prices remain near a four-decade high as costs for items such as food and rent continue to rise. Core inflation, which strips out volatile food and energy prices to give a clearer picture of the trend, rose to 0.6% last month, up from a 0.3% rise in July. This showed that upward pressure on prices was still strong.


Inflation remains high even as gas prices fall

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“Price levels continue to rise – they’re not slowing month-to-month (ie. speeding up, not slowing down) and this inflation problem isn’t going away quietly,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. a note last week.

The Fed on Wednesday raised its key interest ratewhich affects many consumer and business loans, in a range of 3% to 3.25%. It released a forecast showing it expects the benchmark interest rate to be 4.4% by the end of the year, a full point higher than forecast in June.

Despite the economic impact of the rate hike, Fed Chairman Jerome Powell struck a hawkish note by reaffirming his commitment to reducing inflation.

“Decreasing inflation will likely require a sustained period of below-trend growth and will very likely require an easing of labor conditions,” he told a news conference on Wednesday.

“We’ll continue until we’re sure the job is done,” Powell added.

In energy markets, benchmark U.S. crude lost $2.75 to $80.74 a barrel in electronic trading on the New York Mercantile Exchange.

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