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Stock markets fall as Wall Street looks gloomy on economy: NPR

Traders work on the floor of the New York Stock Exchange on September 21, 2022 in New York City. Stocks fell in the last hour of trading after Federal Reserve Chair Jerome Powell announced the Federal Reserve will raise interest rates by three-quarters of a percentage point to further tame inflation. Michael M. Santiago/Getty Images Hide caption

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Michael M Santiago/Getty Images

Traders work on the floor of the New York Stock Exchange on September 21, 2022 in New York City. Stocks fell in the last hour of trading after Federal Reserve Chair Jerome Powell announced the Federal Reserve will raise interest rates by three-quarters of a percentage point to further tame inflation.

Michael M Santiago/Getty Images

Stock markets continued their week-long slide on Friday, with all three major indices falling more than 1% as investors losing confidence in the global economy rushed to the exits.

Wall Street has developed a bleak view of the economy’s future, with a recession looking more likely as it digests warnings from the Federal Reserve about what it will take to cool the country’s overheated inflation.

The Dow fell more than 486 points, or 1.6%, to close at 29,590 on Friday, its lowest level in almost two years. The Dow was down 4% on the week and also closed 19.59% off its last high in January – putting it right at the 20% bear market demarcation line.

The Nasdaq and the S&P 500 have now both entered bear markets. The Nasdaq fell 1.8% to 10,868, or 32.3% from its last peak 10 months ago. The S&P fell 1.72% to 3,693, down 23% from its January peak.

Equity, bond and commodity markets have been anticipating the Fed’s announcement this week that it will continue raising interest rates until inflation is brought under control, regardless of the risks of a recession.

Earlier this year, the central bank hiked interest rates at a rate and magnitude not seen in a generation in hopes of slowing the worst inflation the country has seen in 40 years.

Most Americans have been hoping for a “soft landing,” in which the Fed’s moves to stabilize prices would result in only a modest economic slowdown. But Fed Chair Jerome Powell made it clear on Wednesday that the economy could face a “hard landing” from a severe downturn.

The Fed orders another outsized rate hike as it battles stubborn inflation

“No one knows if this process is going to lead to a recession or how significant that recession would be,” Powell said at a news conference after the Fed announced it would hike interest rates by 0.75% for the third straight month.

“Nevertheless, we are committed to bringing inflation back to 2% because we believe that failure to restore price stability would cause much greater pain later.”

Powell’s comments and a bleak outlook from FedEx, the multinational company heavily linked to the world’s supply chains, have created confusion about the future, with Goldman Sachs analyst David Kostin calling the economic outlook “unusually bleak.”

FedEx is facing a major downturn.  It can give us an important clue about the economy

“The forward paths of inflation, economic growth, interest rates, earnings and valuations are all in flux,” Kostin wrote on Friday.

“Based on our client conversations, a majority of equity investors believe that a hard landing scenario is inevitable and their focus is on the timing, magnitude and duration of a potential recession and investment strategies for those prospects,” he also wrote.

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