Fears of a possible US recession pushed shares on Wall Street lower
The New York Stock Exchange closed again with losses and the main indices are heading for a weekly decline
Screens show ExxonMobil trade information on the floor of the New York Stock Exchange (REUTERS/Brendan McDermid)
Shares lost ground again on Wall Street in Thursday afternoon trading , as fears mount that the United States is headed for a painful recession. The S&P 500 and Dow Jones fell 0.8% and the Nasdaq lost 1 percent.
All major indices are up. on track for losses weekly, after the market started the year up two weeks. Bond yields were flat but have moved lower since the start of the year. Analysts expect the broader market to remain shaky as investors try to get a better picture of inflation and the future path of the economy.
“It really reflects the conflicting views investors have about where things are headed here in early 2023,” said Greg Bassuk, CEO of AXS Investments.
The Reports showed weakness in several areas of the economy, such as real estate and manufacturing in the Mid-Atlantic region, although they were not as bad as expected and the labor market appears to remain healthy. These data come after retail sales, the cornerstone of the economy, and industrial production posted worse-than-expected figures a day earlier.
The latest economic data paints the picture of an economy slowing under the weight of last year's flurry of rate hikes by the Federal Reserve. The central bank aggressively raised interest rates to purposely slow down the economy and cool inflation. The strategy risks slowing economic growth too much and triggering a recession.
Several major banks expect at least a mild recessionthis year, as the impact of the Federal Reserve's rate hikes spills over into the economy. Inflation has been cooling off, but prices for many goods remain stubbornly high, putting pressure on consumers.
The central bank has raised its overnight interest rate up to a range between 4.25% and 4.50%, compared to zero a year ago. The Fed will announce its next decision on interest rates on February 1. Investors expect a rise of just 0.25 percentage points next month, down from December's half-point rise and down from four previous rises of 0.75 percentage points.
The Federal Reserve has maintained that it will not give up its fight against inflation until it is sure that prices are cooling. It has also been closely watching various areas of the economy, including the job market, to get a better idea of whether inflation is slowing. The latest weekly unemployment data shows that employment remains strong, which is good for workers, but makes it harder for the Federal Reserve to fight inflation.
The two-year Treasury yield, which tracks expectations of further action by the Federal Reserve, rose to 4.11% from 4.09% on Wednesday. The 10-year Treasury yield, which influences interest rates on mortgages and other loans, rose to 3.41% from 3.38%.
Wall Street is also closely examining the latest round of corporate results to get a better idea of how companies are coping with inflation and the slowdown in the economy.
Investors are also watching for political events that could end up hurting the economy. The Treasury Department has begun to take “extraordinary measures” as the government has reached the limit of its legal borrowing capacity. Treasury Secretary Janet Yellen sent a letter to congressional leaders on Thursday urging them to act to raise the debt limit. The government may temporarily resort to accounting adjustments to stay open.
European markets fell and Asian markets ended mixed.
(With information from AP)