Stocks fall as Wall Street pessimistic about economy

Stocks fall as Wall Street pessimistic about economy


Traders work at the New York Stock Exchange in New York City on September 21, 2022. Stocks fell in the final hour of trading after Federal Reserve Chairman Jerome Powell announced the central bank would raise interest rates by three-quarters of a percentage point in an attempt to keep inflation in check.

Michael M. Santiago/Getty Images


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Michael M. Santiago/Getty Images


Traders work at the New York Stock Exchange in New York City on September 21, 2022. Stocks fell in the final hour of trading after Federal Reserve Chairman Jerome Powell announced the central bank would raise interest rates by three-quarters of a percentage point in an attempt to keep inflation in check.

Michael M. Santiago/Getty Images

Stocks continued their week of losses on Friday, with all three major indexes down more than 1 percent, as investors who had lost confidence in the global economy fled.

Wall Street has been developing a pessimistic view of the future of the economy, with a recession looking more likely as it digests warnings from the Federal Reserve about what it will do to cool the country’s overheating inflation.

The Dow fell more than 486 points, or 1.6%, to close at 29,590 on Friday, its lowest point in nearly two years. The Dow is down 4% for the week and is also down 19.59% from its most recent peak close in January — bringing it close to the 20% dividing line for a bear market.

Both the Nasdaq and the S&P 500 are now in bear markets. The Nasdaq fell 1.8% to 10,868, 32.3% below its most recent peak 10 months ago. The S&P fell 1.72% to 3,693, down 23% from its January peak.

Equity markets, as well as bond and commodity markets, have been considering the Federal Reserve’s announcement this week that it will continue raising interest rates until inflation is contained, regardless of recession risks.

This year, the central bank has raised interest rates at a pace and magnitude not seen in a generation, hoping to slow the country’s worst inflation in 40 years.

Most Americans are hoping for a “soft landing,” where the Fed’s price-stabilizing measures will bring only a slight economic downturn. But Federal Reserve Chairman Jerome Powell made it clear on Wednesday that the economy could experience a “hard landing” of a severe recession.

“No one knows if this process will lead to a recession, or if it will, how severe it will be,” Powell said at a news conference after the Fed announced its third straight rate hike of 0.75 percent.

“Nevertheless, we are committed to bringing inflation back down to 2%, as we believe failure to restore price stability will mean much more pain later.”

Powell’s comments and a bleak outlook for FedEx, a multinational company closely linked to global supply chains, have left people confused about the future, with Goldman Sachs analyst David Kostin describing the economic outlook as “unusually vague.”

“The future paths of inflation, economic growth, interest rates, earnings and valuations are all in constant flux,” Kostin wrote Friday.

“Based on our discussions with clients, most equity investors believe a hard landing is inevitable, and their focus is on the timing, size and duration of a potential recession and investment strategies for that prospect,” he also wrote.

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