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Dow falls more than 200 points as rising yields fuel recession fears

Inflation is falling hard and faster than expected, says Barry Sternlicht

Stocks fell on Thursday as interest rates rose with Federal Reserve officials signaling rate hikes to slow inflation are far from over.

The Dow Jones Industrial Average fell 245 points, or 0.7 percent. The S&P 500 fell 1.2 percent, while the Nasdaq Composite fell 1.4 percent.

St. Louis Federal Reserve President James Bullard said in a speech Thursday that “the policy rate is not yet in a zone that can be considered sufficiently restrictive.”

“The change in monetary policy appears to have had only limited effects on observed inflation, but market prices suggest that disinflation is expected in 2023,” Bullard added.

The 2-year Treasury yield jumped to 4.437% on Thursday morning, raising fears that higher interest rates will send the economy into recession.

“I’m looking at a labor market that’s so tight, I don’t know how you continue to get this level of inflation down without having any real slowdown, and maybe we even have contraction in the economy to get there,” Kansas City said Fed President Esther George to the Wall Street Journal on Wednesday.

Shares that were most vulnerable to a recession and higher prices led to the losses. Financials including Wells Fargo were lower. Tech stocks Tesla and Netflix fell.

“Further monetary tightening and the cumulative effect of this year’s rate hikes suggest recession risks remain elevated,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note. “We continue to believe that the macroeconomic preconditions for a sustainable rally – that interest rate cuts and a slump in growth and corporate earnings are on the horizon – are not yet in place.”

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