Wall Street Heads For Another Day of Losses Friday as the Federal Reserve’s Lastrenewed fears of a recession.
The S&P 500 fell 62 points to 3,696, or 1.7%, at 10:20 a.m. EST on Friday. The Dow Jones Industrial Average fell 338 points, or 1.3%, to 29,699 and the Nasdaq lost nearly 2%. Barring a wild swing, the major US indices are poised to close out the week with losses for the fourth time in five weeks.
Oil prices fell 3%, threatening to dip below $80 a barrel for the first time since early January.
Fear of global recession
Central banks in Britain, Switzerland, Turkey and the Philippines have all raised interest rates after theon Wednesday for the fifth time this year, signaling more increases to come.
“Global equities are struggling as the world expects rising interest rates to trigger a much faster and potentially severe global recession,” Oanda’s Edward Moya said in a report.
Investors worry that central banks are willing to tolerate a painful economic slump to bring prices under control.
Some point to signs that the US economy is cooling in support for the Fed to call off plans for more rate hikes. But chairman Jerome Powell said Wednesday would raise interest rates for a longer period of time, if necessary, to bring inflation back to the 2% target.
US consumer inflationfrom last month’s 9.1% peak, though prices remain high for nearly four decades as costs for items such as food and rent continue to rise. Core inflation, which excludes volatile food and energy prices to provide a clearer picture of the trend, rose to 0.6% in the previous month, up from 0.3% in July . That indicated that the pressure to increase prices was still strong.
“Price levels continue to rise — they don’t slow down month to month (eg accelerate, don’t slow down) and this inflation problem isn’t going away quietly,” Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance, said in a note from last week.
The Fed on Wednesdaythat affects many , to a range of 3% to 3.25%. It released a forecast showing that it expects the benchmark rate to reach 4.4% by the end of the year, a full point higher than forecast in June.
Despite the economic impact of the rate hikes, Fed Chair Jerome Powell took an aggressive note by reaffirming his commitment to lowering inflation.
“Reducing inflation is likely to require a sustained period of below-trend growth, and will most likely require easing of working conditions,” he said at a news conference on Wednesday.
“We will continue until we are sure the job is done,” Powell added.
In the energy markets, the US benchmark lost $2.75 to $80.74 a barrel in electronic trading on the New York Mercantile Exchange.