A wave of heavy selling fueled by investor concerns that the global economy could slip into recessionaround the world Friday.
The Dow Jones Industrial Average, S&P 500 and Nasdaq each lost more than 1.5% on Friday, with the Dow closing at its lowest level since late 2020. The S&P is down 23% since its peak in January.
As Michael George reports for “CBS Saturday Morning,” interest rate hikes aimed at cutting inflation are having a ripple effect on the economy. On Friday at the New York Stock Exchange, the president of a company called Sustainable Development Equity capped what was a terrible 486-point drop day, followed by a terrible week.
The market has fallen more than 5,000 points in 1[ads1]2 months, with more than 1,000 points lost this week. And there are more storm clouds ahead, according to UC Berkeley economist James Wilcox.
“It’s very likely that we’re going to have a recession, and the likelihood of that happening has been increasing all year, and especially since the summer when the Fed was so aggressive in raising interest rates,” he said.
The Federal Reserve Board’s trio of rate hikes in 2022 has made borrowing more difficult for companies looking to grow and for consumers — especially those hoping to own a home. The average 30-year fixed mortgage rate has risen from 3.3% to 6.7% over the past nine months, thanks to rate hikes by the Federal Reserve.
“How much mortgage rates could go up is awfully hard to know, but I think we could still see some other rates, auto rates, credit card rates, move up and that will make it harder for people to buy new cars or to buy more expensive cars, Wilcox said.
In all of this, White House Press Secretary Karine Jean-Pierre talked about the economy on Friday.
“That’s why we passed, that’s why the Democrats in Congress passed the Inflation Reduction Act. By the way, no Republican supported it,” she said.
The White House also points to gas prices, which have fallen significantly in recent months, and one part of the economy that remains strong: the labor market. Unemployment is 3.7 percent.