Dow is falling by nearly 400 points. Why Stocks Keep Falling | CNN Business

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The good vibes on Wall Street are fading fast: US stocks fell again on Friday afternoon Where investors deal with the deteriorating economy.

The Dow Jones fell 330 points, or 1%. The S&P 500 fell 1.2%, and the Nasdaq Composite fell 1.1%.

The CNN Business Fear and Greed Index, a measure of market sentiment, fell to “Fear” on Friday. The market has been in “greed” mode for weeks.

The sell-off was massive. Only 11 companies in the S&P 500 are trading in the green. The real estate and consumer appreciation sectors were the hardest hit, falling more than 3.5% and 2%, respectively.

Stocks have been rising this month on the back of weaker-than-expected inflation and a number of stronger-than-expected reports on the broad economy and labor market. Investors had hoped the Fed would slow its historical pace of raising interest rates and that inflation could fix itself sometime next year without tipping the economy into recession.

That excitement continued until Federal Reserve Chairman Jerome Powell broke the Wall Street party on Wednesday with some tough news: Federal Reserve economists believe that US gross domestic product, the broadest measure of the US economy, will barely grow next year. They predict that the unemployment rate in the United States will increase to 4.6% by the end of 2023, which means that an additional 1.6 million Americans will be out of work.

Exacerbating concerns about the Fed’s aggressive outlook was a worse-than-expected retail sales report on Thursday that sent stocks lower. The Dow Jones index lost 765 points Thursday, equivalent to 2.3%, which was the worst day for the index in three months. The S&P 500 lost 2.5% and the Nasdaq fell 3.2%, their worst days in a month.

Now, economists at Moody’s Analytics expect the US economy to grow at an annual rate of just 1.9% in the fourth quarter, down from its previous estimate of 2.7%. Weak manufacturing and retail reports worried Moody’s analysts, who also cut their 2023 GDP forecast to just 0.9%, well below the 2022 estimate of 1.9%.

“This leaves little room for anything to go wrong,” Moody’s economist Matt Collyar wrote in an analysis.

Sentiment on Wall Street can shift on a dime, and this week is clear evidence of that: the Dow Jones is down about 1,300 points since the Fed’s policy update at 2pm EST on Wednesday. Stocks don’t help: It’s December. Many traders are on vacation, volume is low and small movements can get aggravated.

But, as my colleague Matt Egan notes, the market may be in a losing position. Good economic news was bad news for investors, because the Fed is trying to cool the economy as part of its anti-inflation campaign. But bad economic news is also bad for investors – and everyone else – because it increases the risk of a recession.

Adobe (ADBE) and Facebook parent Meta are the biggest gainers in the markets today, up 3% and 2.7%, respectively. Shares of Adobe (ADBE) rose after the company reported better-than-expected quarterly earnings and guidance. Meta, still down about 65% for the year, saw a tick after JPMorgan upgraded the company’s shares to neutral from overweight.

CNN’s Nicole Goodkind and Matt Egan Contribute to this report

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