Fears of a possible US recession pushed shares on Wall Street lower

The screens show the commercial information of ExxonMobil on the floor of the New York Stock Exchange (REUTERS/Brendan McDermid) (BRENDAN MCDERMID/)

Stocks lost ground again on Wall Street in afternoon trading on Thursday as prices rise. fears that the United States is headed for a painful recession.

Shortly before closing, the The S&P 500 and the Dow Jones were down 0.7 percent and the Nasdaq was down 0.9 percent.

All major indices are on track to record losses weeklyafter the market began the year with a rise of two weeks. Bond yields were flat but have moved lower since the beginning of the year. Analysts expect the broader market to remain shaky as investors try to get a better picture of inflation and the future path of the economy.

“It very well reflects the conflicting views investors have regarding where things are headed here in early 2023,” said Greg Bassuk, CEO of AXS Investments.

The reports showed weakness in various areas of the economy, such as real estate and manufacturing in the mid-Atlantic region, although they were not as bad as expected and the labor market seems to remain healthy. These data come after retail sales, the cornerstone of the economy, and industrial production posted worse-than-expected figures a day earlier.

The latest economic data paints the picture of an economy slowing under the weight of last year’s flurry of rate hikes by the Federal Reserve. The central bank aggressively raised interest rates to purposely slow down the economy and cool inflation. The strategy risks slowing down economic growth too much and triggering a recession.

Several major banks anticipate at least one slight recession this year, as the impact of the Federal Reserve’s rate hikes spills over into the economy. The inflation It has cooled off, but prices for many products remain stubbornly high, putting pressure on consumers.

The central bank has raised its overnight interest rate to a range between 4.25% and 4.50%, compared to zero a year ago. The Fed will announce its next decision on interest rates on February 1. Investors anticipate a rise of only 0.25 percentage points next month, down from December’s half-point rise and the previous four rises of 0.75 percentage points.

The Federal Reserve has maintained that it will not give up its fight against inflation until it is sure that prices are cooling. It has also been closely watching various areas of the economy, including the job market, to get a better idea of ​​whether inflation is slowing. The latest weekly unemployment data shows that employment remains strong, which is good for workers, but makes it harder for the Federal Reserve to fight inflation.

The two-year Treasury yield, which tracks expectations for further action by the Federal Reserve, rose to 4.11% from 4.09% on Wednesday. The 10-year Treasury yield, which influences interest rates on mortgages and other loans, rose to 3.41% from 3.38%.

Wall Street is also closely scrutinizing the latest round of corporate results. to get a better idea of ​​how companies are coping with inflation and the slowdown in the economy.

Investors are also watching for political events that could end up hurting the economy. The Treasury Department has begun to take “extraordinary measures”, since the Government has reached the limit of its legal borrowing capacity. Treasury Secretary Janet Yellen sent a letter to congressional leaders on Thursday urging them to act to raise the debt limit. The government may temporarily resort to accounting adjustments to stay open.

European markets fell and Asian markets ended mixed.

(With information from AP)

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