The recession continues on Wall Street as recession fears mount

  • Business activity in the United States declined in December
  • Meta jumps when JP Morgan’s rating upgrade
  • Adobe rises based on optimistic earnings expectations
  • Dow Jones fell 1.39%, S&P 500 down 1.52%, Nasdaq down 1.33%

NEW YORK (Reuters) – U.S. stocks braced for a third straight session of declines and a second straight week of losses on Friday, as concerns grew that the Federal Reserve’s effort to stifle inflation would push the economy into recession.

Equities have been under pressure since the US central bank’s decision to raise interest rates by 50 basis points as expected. But comments from Fed Chairman Jerome Powell indicated further policy tightening, and the central bank predicted that interest rates would cross the 5% mark in 2023, a level not seen since 2007.

Other comments from Federal Reserve officials raised concerns. New York Federal Reserve Bank President John Williams said on Friday that it is still possible for the US central bank to raise interest rates more than it expects next year. The policy maker added that he does not expect a recession due to aggressive Fed tightening.

Additionally, Mary Daly, President of the Federal Reserve Bank of San Francisco, said it’s “reasonable” to think that once Fed policy rates peak, they can stay there until 2024.

“The market again, it’s kind of like deja vu, it seems to have gotten a little ahead of itself in terms of how and when the Fed will get more dovish and start speaking in terms that make the market understand when it gets lower,” said Keith Buchanan, senior portfolio manager at Globalt Investments in Atlanta. , “restricted”.

“The market is now more concerned that if the policy remains as restrictive or could become restrictive in the middle of next year, there are concerns that something could go wrong with the policy.”

The Dow Jones Industrial Average fell 462.36 points, or 1.39%, to 32,739.86 points, the Standard & Poor’s 500 lost 59.39 points, or 1.52%, to 3,836.36 points, and the Nasdaq Composite Index fell 143.51 points, or 1.33%, to 10,667.02.

Money market bets show at least two interest rate hikes of 25 basis points in the next year and a final rate of about 4.8% by mid-year, before it drops to around 4.4% by the end of 2023.

On the economic front, a report showed that US business activity contracted further in December as new orders fell to their lowest level in just over two-and-a-half years, although easing demand helped calm inflation.

The tech-heavy Nasdaq closed Thursday below its 50-day moving average, a key technical level seen as a sign of momentum. The S&P 500 appeared poised to close below its 50-day moving average for the first time since November 9.

The prospects for a “Santa Claus rebound,” or year-end rally, in markets have diminished this year, as the majority of global central banks have adopted tightening policies. The Bank of England and the European Central Bank were the latest to signal an extension of the rate hike cycle on Thursday.

Reuters Graphics Reuters

The expiration of stock options, stock index futures, and index options contracts later in the day, known as the magic triple, can cause volatility during the trading session.

All 11 major sector indices of the S&P 500 were in the red, led by a drop of nearly 4% in real estate stocks (.SPLRCR).

Meta Platforms Inc (META.O) advanced 3.37% after JP Morgan upgraded the stock to “overweight” from “neutral,” while Adobe Inc (ADBE.O) gained 3.08% after the Photoshop maker forecast first-quarter earnings higher than expectations.

Exact Sciences Corp (EXAS.O) rose 18.72% after rival cancer testing Guardant Health Inc (GH.O) missed expectations, while General Motors (GMN) lost 3.87% after its robotic cruise unit faced a safety investigation by the automaker. American. Safety organizations.

Low issues outnumbered high issues on the NYSE by a ratio of 3.70 to 1; On the Nasdaq, the ratio was 2.37 to 1 in favor of declining stocks.

The S&P 500 has not posted 52-week highs and 17 new lows; The Nasdaq index posted 34 new highs and 316 new lows.

(Reporting by Chuck Mikolajczak) Editing by Jonathan Otis

Our Standards: The Thomson Reuters Trust Principles.

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