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Investors were relieved on Friday after a sharp turnaround in losses, but Wall Street closed its worst week since the first chaotic days of the coronavirus pandemic, when the Federal Reserve’s aggressive push began. control inflation and the danger of causing a recession. settle in.
The Dow Jones Industrial Average fell 38 points, or 0.1 percent, a day after the blue-chip index fell below 30,000 for the first time since January 2021. The S&P 500 rose 8 points or 0 percent. , 2 percent, while the high-tech Nasdaq rose 152 points. or 1.4 percent.
Investors are still struggling with the Fed’s momentous decision to raise interest rates by three-quarters of a percentage point. The measure has far-reaching consequences for consumers, as it makes it more expensive to borrow money and carry a credit card balance. New data released on Wednesday also points to a more rugged path, with higher unemployment, slower economic growth and record prices that will take longer to come down.
Recession fears grow as Dow closes below 30,000 and mortgage rates rise
Mortgages, for example, have risen sharply this week: a 30-year fixed-rate mortgage has reached 5.78 percent this week, according to Freddie Mac. Just a week ago it was 5.23, the biggest jump in a week since 1987.
“The housing market is not crashing, but it is experiencing a hangover due to an unsustainable high,” Redfin Deputy Chief Economist Taylor Marr said in a blog post on Thursday. “Demand for housing has already cooled significantly to the point that the industry has begun to cope with layoffs. This week’s rate hikes will further strain homebuyers ‘budgets to the point that’ n can lower many more, ”he said.
Rates have almost doubled in recent months: a 30-year fixed-rate loan, the most popular option, was close to 3 percent in November. The difference would increase the monthly mortgage on a $ 500,000 home by about $ 700, according to a Washington Post analysis. Over the life of the loan, the increase in the fee entails an additional payment of $ 256,000, or more than half the price of the home.
The average home price in the United States was $ 391,200, according to the latest National Association of Realtors data released last month.
“While many homeowners are already lowering their prices, more homeowners are likely to decide to stay now that the mortgage rate on a new home is significantly higher than their current one,” Marr said. of Redfin.
Americans brave enough to look at their 401 (k) or other investment accounts probably came across some ugly math. Portfolios covering almost all sectors have suffered declines, and color-coded grids showing stock gains and losses showed a solid red wall. The S&P 500, a key benchmark for measuring financial performance over time, has lost nearly a quarter of its value this year.
The broad index fell 5.8 percent during the week, the strongest loss since the onset of the public health crisis in March 2020. The Nasdaq and Dow have fallen 5 percent during the week. week, highlighting the pessimism that seeps into Wall Street.
The S&P 500 is having its worst week
since March 2020
A bear market began on Monday
after more than expected
inflation data
The shares are falling
following the Fed
rising interest rates
The S&P 500 is having its worst week
since March 2020
A bear market began on Monday
after more than expected
inflation data
Shares fall later
the rise in Fed interest rates
and a rise in mortgage rates
But it’s not just investor sentiment that has become bitter. Higher interest rates are designed to drive American consumers to spend less money, which reduces the demand for products and services. While Fed Chairman Jerome H. Powell has defended the decision to aggressively raise interest rates to contain inflation, some experts fear that the strategy could be an exaggerated reaction and bring the economy to a standstill. a recession later this year or 2023. More rate hikes are expected in the coming months, but may come in smaller increments.
Investors will also look at corporate earnings in the coming quarters to assess how executives interpret a potential economic center of the city. Many U.S. management teams are planning obstacles in advance, as rising costs and inflation uncertainty are holding back demand for their products.
“These latest signals come from slashed projections by economists around the world, as growth expectations have been dampened by a cocktail of persistent supply chain shortages, high inflation and increased geopolitical uncertainty.” said Nicole Tanenbaum, chief investment partner and strategist. Ladies Financial Management.
Richard Saperstein, chief investment officer of Treasury Partners, said the market is reacting to uncertainty about the Fed’s efforts to control inflation. But he said that an additional concern remains the unpredictable events linked to the ongoing war in Ukraine that the market has not fully considered.
As Wall Street explodes, gas prices continue to rise while inflation has yet to peak, according to the latest data that may have surprised policymakers hoping to cut prices. But the economy has added several million jobs this year and consumer spending remains robust. Conflicting signals present a puzzle for analysts and political leaders and highlight uncertainty about the future of the economy.