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Wall St slumps as investors fret on rate hikes and recession

Stock Markets Sep 23, 2022 06:01PM ET
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2/2 © Reuters. FILE PHOTO: A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., September 13, 2022. REUTERS/Andrew Kelly 2/2
 
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By David French

(Reuters) - Wall Street's main indexes slumped to close well down on Friday, as rattled investors continued repositioning themselves to reflect fears the U.S. Federal Reserve's hawkish rate policy to curb inflation will push the American economy into recession.

The Dow narrowly avoided ending more than 20% lower than its Jan. 4 record all-time closing peak of 36,799.64 points, meaning the blue-chip index did not attain a bear market label, according to a widely used definition.

The S&P 500 and the Nasdaq are already in a bear market.

However, all three indexes suffered heavy weekly declines. The Nasdaq dropped 5.03% - its second straight week falling by more than 5% - with the S&P down 4.77% and the Dow 4% lower.

After enjoying hefty gains for last two years, Wall Street has been rocked in 2022 by worries about a host of issues including the Ukraine conflict, the energy crisis in Europe, China's COVID-19 flare ups, and tightening financial conditions across the globe.

A half dozen central banks, including in the United States, Britain, Sweden, Switzerland and Norway, delivered rate hikes this week to fight inflation, but it was the Fed's signal that it expects high U.S. rates to last through 2023 that caught markets off guard.

"There had been some optimists out there saying that inflation may be coming under control but the Fed effectively told them to sit down and shut up," said David Russell, VP of market intelligence at TradeStation Group.

"The Fed is trying to rip the band-aid off, trying to kill inflation while the jobs market is still strong."

Dire outlooks from a handful of companies have also added to woes in a seasonally weak period for markets. Having withdrawn its earnings forecast last week, FedEx Corp (NYSE:FDX) outlined on Thursday cost cuts of up to $2.7 billion after falling demand hammered first-quarter profits.

The delivery giant's stock slumped 3.4% to its lowest close since June 30, 2020.

The S&P 500's estimated earnings growth for the third quarter is at 4.6% down from 5% last week, according to Refinitiv data.

Goldman Sachs (NYSE:GS) cut its year-end target for the benchmark S&P 500 index by about 16% to 3,600 points.

"We're having everyone reassess exactly how far the Fed will go, and that's troubling for the economy," said Ed Moya, senior market analyst at OANDA.

"It's becoming the base case scenario that this economy is going to have a hard landing, and that is a terrible environment for U.S. stocks."

The Dow Jones Industrial Average fell 486.27 points, or 1.62%, to 29,590.41, the S&P 500 lost 64.76 points, or 1.72%, to 3,693.23 and the Nasdaq Composite dropped 198.88 points, or 1.8%, to 10,867.93.

All the 11 major S&P sectors declined, led by a 6.8% slide in energy shares. Oil and gas-related stocks were pummeled by the decline in crude prices, which fell in response to concerns about demand in a recessionary environment and the strong U.S. dollar. [O/R]

Oilfield services were particularly hit, with Helmerich and Payne Inc down 11.2% and Schlumberger (NYSE:SLB) dropping 8.4%. Halliburton (NYSE:HAL) Co declined 8.7%, to record its lowest finish since Jan. 3.

Rate-sensitive technology and growth stocks dropped with Alphabet (NASDAQ:GOOGL) Inc, Apple Inc (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT) and Tesla (NASDAQ:TSLA) Inc all fell between 1.3% and 4.6%.

Shares of Costco Wholesale Corp (NASDAQ:COST) dropped 4.3% after the big-box retailer reported a fall in its fourth-quarter profit margins.

The CBOE volatility index, also known as Wall Street's fear gauge, rose to a three-month high of 29.92.

Volume on U.S. exchanges was 13.29 billion shares, compared with the 11.11 billion average for the full session over the last 20 trading days.

The S&P 500 posted no new 52-week highs and 151 new lows; the Nasdaq Composite recorded 10 new highs and 823 new lows.

Wall St slumps as investors fret on rate hikes and recession
 

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Comments (59)
jack bay
jack bay Sep 24, 2022 11:21AM ET
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i hope nasdaq trend up 12500,
Herbert Schiskin
Herbert Schiskin Sep 24, 2022 9:44AM ET
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Focus on policy makers, even though we have inflation they keep spending lots more, to get sympathy from poor people, tho they know that they are making everybody poorer in the process thru inflation AND they have Powell to get all the blame.
First Last
First Last Sep 24, 2022 9:44AM ET
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The stupid blames all on Powell.  The intelligent blames most on Putin.
Surya Kartilas
Surya Kartilas Sep 24, 2022 9:44AM ET
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obvious where all the IOU need to be repaid by another IOU.. nothing left but economic cancer.
Kerry Ditto
Kerry Ditto Sep 24, 2022 7:25AM ET
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capitulation is over. cautious, gradual bounce begins. or knee-jerk bounce comes. if lucky, massive rally events come along.
Ronald Warren
Ronald Warren Sep 24, 2022 7:25AM ET
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You couldn't be more wrong. The DOW has broken through it's $30,000 support. Look out below.
Brad Albright
Brad Albright Sep 24, 2022 7:25AM ET
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Agreed. There might be some up days next week, but this is far from capitulation.
Kerry Ditto
Kerry Ditto Sep 23, 2022 9:24PM ET
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maybe Fed power is weakened by crytos. crytos may play the Fed role.
Kerry Ditto
Kerry Ditto Sep 23, 2022 9:22PM ET
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high interest rates have good things like social security recipients get huge extra buying power which plow back to company earnings. small firms will benefit most
First Last
First Last Sep 23, 2022 9:22PM ET
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Programs like snap keep food prices and demand high, which end up benefiting farmers & big agri /food companies.  Ironic that Republicans keep whining about programs that benefit their bases.
Dennis Chuck
Dennis Chuck Sep 23, 2022 7:41PM ET
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S you powell!
Marco cuevas
Marco cuevas Sep 23, 2022 6:34PM ET
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We could have a nuke drop and stock market fall in 2030 and REUTERS BE LIKE ....RECESSION. LOL
Dave Jones
Dave Jones Sep 23, 2022 4:41PM ET
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And yet gold goes down!
Alex Malmstrom
Alex Malmstrom Sep 23, 2022 4:41PM ET
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That's what usually happens to gold during a recession.
Chad Richer Than You
Chad Richer Than You Sep 23, 2022 3:52PM ET
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As Chad & Co shorts Wall St into the ground 💰💰!
lakes Tenn
lakes Tenn Sep 23, 2022 2:49PM ET
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how will the Democrats try to spin a 3rd negative GDP next week?
First Last
First Last Sep 23, 2022 2:49PM ET
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What you means "will"?   They've been correctly attributing it to Russian aggression.  You would know that if you stop consuming extreme right, conspiracy nut-job medias.
Jeff Chevalier
Jeff Chevalier Sep 23, 2022 2:49PM ET
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With a dose of reality. It's a global issue and the US exports a lot of stuff. If other countries don't buy, GDP goes down. Too many uneducated folks on here thinking the US is an island.
 
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