Stocks fall as recession fears rise – News
CNN Business in New York –
U.S. stocks fell sharply on Friday as investors worried about further rate hikes from the Federal Reserve that could push the U.S. economy into recession.
The Dow (INDU) fell 602 points, or 2%, in afternoon trading. The S&P 500 (SPX) and Nasdaq (COMP) composites each fell 2.2%.
The Dow is currently within 20 points of reaching bearish territory. If the Dow ends at or below 29,439.72, it would mark a 20% decline from the index’s all-time high of 36,799.65 set on Jan. 4 and send the index into an official bear market. The index is currently on track to close the day below 30,000 points for the first time since June 17. Another big dip on Friday could send the index to a two-year low.
The S&P 500, at 3,674, is flirting with its June 16 close at 3,666.67.
“We are now in another bearish position in a continuing bear market,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “This year there have been four crashes and three rallies, and we have gone down a bit. It does not smell good.”
Investors don’t have much room to make money right now: In addition to falling stocks, the bond market is also selling off, with US Treasury yields hitting 11-year highs in recent days. The 10-year rate fell slightly on Friday but remained close to 3.7% and the 2-year rate was above 4.1%. That’s a much better return than equities these days, so higher bond yields add pressure to the stock market.
Wall Street is also concerned that the Fed’s rate-hike plan could increase borrowing costs, hurting earnings for companies that support their stock prices. And if the Fed is serious about slowing the economy to rein in runaway inflation, a recession could cause real pain for consumers who buy the products made by publicly traded companies.
Evan Finseth, chief market strategist at Tigress Financial Intelligence, said the market selloff could continue for some time as stock valuations are squeezed by Fed actions. Investors “won’t see the bottom until we’re sure inflation indicators are significantly lower,” he added.
In other words: Wall Street has a lot to think about. The CNN Business Fear and Greed Index has fallen solidly into “fear” mode in recent days and is approaching “extreme fear.” Investors see nothing to smile about.
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