Stocks plummet on Wall Street, nearing a bear market
NEW YORK (AP) — Stocks open sharply lower on Wall Street as inflation worries mount, bringing the S&P 500 one step closer to a bear market decline of 20% from its peak earlier this year.
The index fell 2.3% as traders fear inflation, already at its highest level in four decades, could be even harder to rein in than expected. The Federal Reserve is meeting again this week and investors expect more aggressive action to slow the economy with higher interest rates. One of the fears is that the Fed may have to put the brakes on the economy so hard that it could trigger a recession. Treasury yields climbed again.
THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.
NEW YORK (AP) — U.S. markets fell sharply ahead of Monday’s opening bell, with the S&P 500 pointing to bearish territory amid growing pessimism over four decades of stubbornly high inflation.
Dow Jones industrials futures fell more than 500 points, or 1.7%, while S&P futures fell 2.2%, or 91.50, to 3,809. C is down more than 20% since Jan. 3 and if it continues through the close of markets, it would push Wall Street’s main health barometer into a bear market.
Economists had expected a US consumer price report on Friday to show the worst inflation in generations had eased slightly last month. But inflation accelerated to 8.6% in May.
This would suggest that the Federal Reserve will need to continue to aggressively raise interest rates and take other measures to slow the economy and rein in inflation.
The Fed is increasingly expected to raise its main short-term interest rate by half a percentage point at each of its next three meetings, starting next week. Last month’s half-point hike is the only time since 2000 that the Fed has hiked rates that much.
Soaring prices and Fed policy expectations pushed the two-year Treasury yield to its highest level since 2008 and the S&P 500 down 18.7% from its record high set in early January.
On the opposite end of the spectrum of risk, cryptocurrencies are under fire. Bitcoin fell another 12% and fell below $24,000 early Monday, levels last seen in the latter part of 2020. Bitcoin price approached $68,000 at the end of the month. last year.
But the damage is widening with retailers and others warning of profits to come.
Historically low interest rates put in place by the Fed and other central banks have helped keep investment prices high. Now “easy mode” for investors is disabled. Since higher interest rates make borrowing more expensive, which dampens household and business spending and investment, there is also a risk that the Fed could drag the US economy into a recession.
The fear is that food and fuel prices will continue to rise no matter how aggressive the Fed is, in part because of the crisis in Ukraine, which is a major breadbasket for the world.
In Europe at midday, the German DAX lost 1.9% and the CAC 40 in Paris fell 2.1%. Britain’s FTSE 100 lost 1.6%.
Tokyo’s Nikkei 225 lost 3% to 26,987.44 and the Hang Seng in Hong Kong slipped 3.4% to 21,067.58. In South Korea, the Kospi fell 3.5% to 2,504.51 as a strike by truckers added to concerns over supply chain disruptions. The Shanghai Composite Index fell 0.9% to 3,255.55.
Thailand’s benchmark fell 1.7%. Australian markets were closed for a holiday.
Regional concerns also weighed on sentiment, as China battles more coronavirus outbreaks after easing some precautions in recent weeks.
This means that “the previous optimism surrounding the reopening of China could also take a break, as the resumption of mass testing in Beijing and Shanghai seems to put the risks of Covid-19 at the forefront again”, said Jun Rong. Yeap from IG in a comment.
On Saturday, the national average for a gallon of regular gasoline topped $5, by a fraction of a penny, according to the AAA auto club.
In other trading, the benchmark U.S. crude lost $2.09 to $118.58 a barrel in electronic trading on the New York Mercantile Exchange. It lost 84 cents to $120.67 on Friday.
Brent crude, the price standard for international trade, fell $1.99 to $120.02 a barrel.
The dollar fell from 134.37 yen to 134.48 Japanese yen. It briefly traded at around 135.20 yen. It was the yen’s weakest level since October 1998 and prompted officials to express concern.
Chief government spokesman Hirokazu Mizuno told reporters the government was monitoring the situation and “would take action whenever necessary”.
“The recent sharp falls in the yen increase uncertainty about the outlook and make it difficult for companies to develop business plans, so they are negative and undesirable for the economy,” Kyodo News Service quoted the governor as saying. the Bank of Japan, Haruhiko Kuroda.
The euro fell to $1.0457 from $1.0518.
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