New York (AP) – Wall Street fell to what A. Brewery did on Monday, following fears of a fragile economy and rising interest rates, the S&P 500 fell more than 20% from the start this record year.
The index fell 3.9% after investors first traded, which received massive news coverage over the weekend. Inflation is getting worse, not better. The Dow Jones Industrial Average dropped briefly by more than 1,000 points before ending up with 876 losses.
The selling center still has the Federal Reserve System, which is trying to control inflation. Its main way of doing this is to raise interest rates to slow the economy, a dull instrument that threatens to shrink if used too aggressively.
Because the Fed seems more aggressive, prices have dropped around the world on everything from Bitcoin bonds, New York to New Zealand. Some of the steepest falls hit what is easier for big winners during low rates, such as high-growth tech stocks and other former investor favorites. Tesla fell 7.1%, while Amazon fell 5.5%. GameStop fell 8.4%.
“The best thing people can do is panic and not sell deep,” said Randy Frederick, chief executive of trade and derivatives at the Schwab Financial Research Center. “And we probably don’t have a chin. “
Some economists suggest the Fed could raise its benchmark interest rate by three-quarters of a percentage point on Wednesday. That’s three times the average amount and what the Fed hasn’t done since 1994. According to the CME group, traders now see a 28% chance of such a big increase, from 3% just a week ago, according to the CME group.
No one thinks the Federal Reserve will stop there, the markets are preparing for a bigger than usual increase. This will be followed by reassuring signs on the economy and corporate earnings, including pre-reading consumer sentiment at an all-time low deterioration. High fuel prices.
The economy as a whole is still stagnant, but the risk is that the labor market and other factors are hot enough to lead to higher inflation. That’s why the Federal Reserve is far from the record low interest rates it created during the pandemic, which boosted stocks and other investments in hopes of reviving the economy.
Wall Street’s warning that inflation is accelerating rather than rising is also pushing U.S. bond yields to their highest level in more than a decade. The two -year Treasury bond yield rose 3.36% from 3.06% at the end of Friday for the second significant step in a row. According to Tradeweb, it has reached its highest level since 2007.
The 10-year yield jumped from 3.15% to 3.37% and is at higher levels Mortgage AND many other more expensive types of loans. It reached its highest level since 2011.
Higher yields mean lower prices on bonds, which have been relatively rare for them in recent decades. They are a particularly painful blow to older, more conservative investors who rely on them as safe parts of their nests.
The gap between two-year and 10-year incomes has also dramatically narrowed, indicating a slowdown in optimism about the economy. When a two-year yield exceeds 10 years, it is an unusual event, with some investors seeing it as a sign of an impending recession.
Some of the biggest hits came with cryptocurrencies, which rose at the start of the pandemic because very low rates encouraged some investors to make the most risky investments. According to Coindesk, Bitcoin fell more than 14% the previous day to $ 23,400. It returned to normal at the end of 2020 and dropped from $ 68,990 at the end of last year.
On Wall Street, the S&P 500 fell 151.23 points to 3,749.63 and fell 21.8% on the record set earlier this year to bring it into what investors call the bear market.
Bears are wintering, so bears are a declining market, says Sam Stowall, CFRA’s investment strategist. Conversely, Wall Street’s nickname for the rising stock market is the bull market because bulls are valued, Stowall said.
The S&P 500 lost nearly 9% in just three days. This was its worst season in March 2020, since the early days of the corovirus crash. The Dow fell 876.05, or 2.8%, to 30,516.74 on Monday, while the Nasdaq Composite fell 530.80, or 4.7%, to 10,809.
The corovirus outbreak in early 2020 was Wall Street’s last bear market and didn’t typically last only a month. The S&P 500 approached the bear market last month, but it didn’t end the day below the 20% mark.
Michael Wilson, a Morgan Stanley strategist among Wall Street’s most pessimistic voices, defends his view that the S&P 500 could fall further to 3400, even if the U.S. economy avoids a recession next year. .
This would be another roughly 9% drop from current levels, and Wilson said it reflects his view that Wall Street’s earnings forecasts, among other things, are very optimistic. still.
For consumers, even those with higher incomes, due to rising prices, Wilson said in a report that “the next shoe is a discount cycle” as companies try to clean up their accumulated inventory.
Such measures will reduce their profitability and the share price will increase and decrease mainly for two things: how much the company will earn and how much the investor will pay.
AP Business writers Damian J. Troise and Elaine Kurtenbach contributed.
Source: Huffpost
