Stocks fell on Wall Street on Friday as concerns grew that the Federal Reserve and other central banks are poised to trigger a recession if that’s what it takes to get inflation under control.
The Standard & Poor’s 500 was down 1.4% at 10:41 a.m. EST and was heading for its second consecutive weekly loss. The Dow Jones Industrial Average fell 407 points, or 1.2%, to 32,796 and the Nasdaq composite fell 1%.
The losses were wide. More than 90% of companies in the benchmark S&P 500 have fallen. Tech stocks suffered some of the biggest losses. Microsoft fell 1.3%.
The Fed this week raised its forecast for how high it will eventually push interest rates and tried to dash some investors’ hopes that rate cuts could take place next year. In Europe, the central bank appeared even more aggressive in the eyes of many investors.
Inflation has fallen from its highest levels in decades, but remains painfully high. This prompted the Fed to maintain its aggressive attack on prices by raising interest rates to slow economic growth. However, hitting the brakes too hard risks sending an already slowing economy into recession.
A mixed report from S&P Global on Friday underscored this risk. It showed business activity slowed more than expected this month as inflation weighed on businesses. He also noted that this was the biggest decline since May 2020, but inflationary pressures have also eased.
“In short, the survey data suggests that the Fed’s rate hikes are having the desired effect on inflation, but the economic cost is increasing and the risks of recession are increasing as a result,” Chris Williamson said. , chief economist at S&P Global Market Intelligence.
Markets in Europe fell and markets in Asia were mostly down.
Bond yields gained ground. The 10-year Treasury yield, which influences mortgage rates, rose to 3.52% from 3.45% on Thursday evening. The two-year Treasury yield, which closely tracks expectations of Fed moves, rose to 4.26% from 4.24% late Thursday.
The Fed ended its last meeting of the year on Wednesday by raising its short-term interest rate by half a percentage point, its seventh straight increase this year. Wall Street had hoped the central bank would signal an easing in rate hikes by 2023, but the Fed instead signaled otherwise.
The federal funds rate is in a range of 4.25% to 4.5%, the highest level in 15 years. Fed policymakers expect the central bank rate to reach a range of 5% to 5.25% by the end of 2023. Their forecast does not call for a rate cut until 2024.
Several companies withstood broader losses on Friday after reporting strong financial results and guidance. Software maker Adobe rose 4% after beating Wall Street’s fiscal fourth-quarter profit forecast. United States Steel gains 4.3% after giving investors strong earnings forecasts.
Elaine Kurtenbach and Matt Ott contributed to this report.