New York (AFP) – Another drop in stocks Friday pushed the S&P 500 index 20% below the peak it set early this year.
The benchmark is down 2% on the day in early afternoon trade, and is on track for its seventh consecutive week of losses.
high interest rateshigh inflationwar in ukraineslowdown in the Chinese economy All are punishing stocks and raising concerns about a possible recession in the United States.
If the S&P 500 ends the day 20% or more below the record, it will enter what Wall Street calls a “bear market.” The most recent was in early 2020 at the start of the pandemic, an unusually short pullback that slashed 34% of the S&P 500 index.
The stock market remains stuck in the doldrums amid concerns about how inflation will affect businesses and consumers. Investors are also concerned about the Federal Reserve’s aggressive rate hike plan and whether it will help mitigate the impact of inflation or potentially push the economy into deflation.
“The market volatility has certainly been driven by investor fears that the Fed is going to tighten policy too much and put us in a recession,” said Michael Aaron, chief investment analyst at State Street Global Advisors.
The S&P 500 was down 2.1% as of 1:39 PM ET. The Dow Jones Industrial Average fell 569 points, or 1.8 percent, to 30,683 points, and the Nasdaq fell 2.9 percent. All three are headed for a decline of 4% or more for the week.
Bond yields fell as investors shifted their money to lower-risk investments. The yield on the 10-year Treasury, which helps determine mortgage rates, fell to 2.78% from 2.85% late Thursday.
Concerns about inflation increased with the Russian invasion of Ukraine driving up energy prices and some key food commodities. China, the world’s second largest economy, has been hit by a renewed blow from lockdowns in major cities due to COVID-19 cases, but the sudden interest rate cut by the Chinese government eased some of the anxiety at least temporarily.
Wall Street has been absorbing this week’s retail earnings. The sector is a major focus as investors try to gauge how much inflation is hurting the company’s operations and whether price hikes on everything from food to apparel are causing consumers to spend more.
Retail giants target Walmart Both had warnings this week about lowering inflation. Retailer Ross Stores fell 24% on Friday after it cut its profit forecast and cited rising inflation as a factor.
“The latest earnings from retail companies finally indicated that US consumers and businesses are negatively affected by inflation,” Aaron said.
Investors continue to monitor the Federal Reserve for hints of further rate hikes to cool inflation that is at four-decade highs. Federal Reserve Chairman Jerome Powell said this week that the US central bank could take more aggressive action if price pressures fail to ease.
Technology stocks fell broadly and weighed on the market. Applied Materials, which produces chip-making equipment, fell 7.7%. The technology sector has been particularly volatile and drove several significant market swings throughout the week.