Wall Street is headed for another day of losses on Friday as the Federal Reserve’s latest rate hike reignited recession fears.
The S&P 500 fell 62 points to 3,696, or 1.7%, as of 10:20 a.m. EST on Friday. The Dow Jones Industrial Average fell 338 points, or 1.3%, to 29,699 and the Nasdaq fell nearly 2%. Barring a wild bout, the major US indices are poised to end the week in losses for the fourth time in five weeks.
Oil prices fell 3% and threatened to fall below $80 a barrel for the first time since early January.
The Federal Reserve hikes interest rates again at 00:23
Fear of a global recession
Central banks in the UK, Switzerland, Turkey and the Philippines raised interest rates after the Fed hiked interest rates for the fifth time this year on Wednesday, signaling more rate hikes were imminent.
“Global equities are struggling as the world expects a rate hike to trigger a much earlier and potentially severe global recession,” Oanda’s Edward Moya said in a report.
Investors fear central banks may be willing to tolerate a painful economic downturn in order to get prices under control.
Some are pointing to signs the US economy is slowing as the Fed plans to hike rates further. However, Chair Jerome Powell said on Wednesday that interest rates would remain higher if necessary to bring inflation back to its 2 percent target.
US consumer inflation slipped to 8.3% in August from a peak of 9.1% the previous month, although prices remain near four-decade levels as food and rental costs continue to rise. Core inflation, which excludes volatile food and energy prices to give a clearer picture of the trend, rose to 0.6% mom from a 0.3% rise in July. This indicated that upward pressure on prices remained strong.
Inflation remains high even as gas prices fall at 07:54
“Price levels continue to rise — they’re not slowing down (ie speeding up, slowing down) every month, and this inflation problem isn’t quietly going away,” said Chris Zaccarelli, chief investment officer at the Alliance of Independent Advisors. note from last week.
The Fed raised interest rates, which affect many consumer and business loans, to a range of 3% to 3.25% on Wednesday. It released a forecast showing that the policy rate will be 4.4% by the end of the year, a full point higher than forecast in June.
Despite the economic impact of rate hikes, Fed Chair Jerome Powell sounded a dovish note as he reiterated his commitment to curbing inflation.
“Reducing inflation will likely require a sustained period of below-trend growth and very likely an easing of working conditions,” he told a news conference on Wednesday.
“We’re going to keep going until we’re confident the job is done,” Powell added.
In energy markets, the benchmark US crude slipped $2.75 to $80.74 a barrel in electronic trading on the New York Mercantile Exchange.