Shares fell slightly on Thursday, with the S&P 500 heading for its sixth weekly decline in a row and approaching bear market territory.
Trading was turbulent, and after a sharp rally, the S&P 500 ended just 0.1 percent lower, after a fall of 1.7 percent on Wednesday.
The Nasdaq composite was also volatile, but changed little at the end of the day.
Although Wall Street’s sales this year – which come after the S&P 500 rose 90 percent over the previous three years – began with concerns about rising inflation and interest rates, and how the combination could hurt the economy, it has gained a life of its own as Investors see each new data point as a cause for concern.
The sale has also affected cryptocurrencies such as Bitcoin, and metals and other commodities such as copper and oil, losses that reflect weakened sentiment across financial markets and concerns about the global economy.
The fall has left the S&P 500 on the brink of a bear market, Wall Street’s designation of a fall of 20 percent or more from the last peak. The label is intended to highlight how dark the mood among investors has become. On Thursday, the index was down around 18 percent from its peak on 3 January. The Nasdaq Composite is well into the bear market, down 29 percent from its peak in November.
The fall this week has come with recent updates on the inflation rate in the US. The consumer price index rose 8.3 percent a year through April, the government said on Wednesday, while a measure of prices paid to producers rose 11 percent. While both measures showed that inflation slowed slightly from the previous month, they are still uncomfortably high.
For equity investors, the inflation data provide direct information on how aggressively the Federal Reserve will raise interest rates: Higher borrowing costs will slow growth and also dampen interest in risky investments.
Analysts say stock market sentiment is unlikely to change until they get hold of when the Fed, which raised its benchmark rate by half a percentage point this month and is expected to do so again when it meets in June and July, will slow the pace of gains. It will not be clear until it is certain that inflation has reached its peak.
“The Fed wants to see clearer evidence that inflation is cooling and higher interest rates are slowing demand before they start thinking about the end of the current rate hike cycle,” Comerica Bank chief economist Bill Adams wrote in a note to customers on Thursday.