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| Photo Credit: AP. |
(AP) - Wall Street is at its worst levels in almost two years Friday as the end nears for what’s been a miserable month for markets around the world.
The S&P
500 was down 0.4% in afternoon trading after flipping between small losses and
gains through the morning. It’s at its lowest level since November 2020, and
it’s on pace to close out its sixth weekly loss in the last seven, one of its
worst months since the early 2020 coronavirus crash and its third straight
losing quarter.
The Dow
Jones Industrial Average was down 213 points, or 0.7%, at 29,010, as of 1:56
p.m. Eastern time, and the Nasdaq composite was down 0.2%.
The main
reason for this year’s struggles for financial markets has been fear about a
possible recession, as interest rates soar in hopes of beating down the high inflation
that’s swept the world.
The Federal
Reserve has been at the forefront of the global campaign to slow economic
growth and hurt job markets just enough to undercut inflation but not so much
that it causes a recession. More data arrived Friday to suggest the Fed will
keep its foot firmly on the brakes on the economy, raising the risk of its
going too far and causing a downturn.
The Fed’s
preferred measure of inflation showed it was worse last month than economists
expected. That should keep the Fed on track to keep raising rates and hold them
at high levels a while, as it’s loudly and repeatedly promised to do.
Vice Chair
Lael Brainard was the latest Fed official on Friday to insist it won’t pull
back on rates prematurely. That helped to keep snuffed out hopes on Wall Street
for a “pivot” toward easier rates as the economy slows.
“At this
point, it’s not a matter of if we’ll have a recession, but what type of
recession it will be,” said Sean Sun, portfolio manager at Thornburg Investment
Management.
Higher
interest rates knock down one of the main levers that set prices for stocks.
The other lever also looks to be under threat as the slowing economy, high
interest rates and other factors weigh on corporate profits.
Cruise ship
operator Carnival dropped 21% for one of Wall Street’s worst losses after it
reported a bigger loss for its latest quarter than analysts expected and
revenue that fell short of expectations.
Nike slumped
12.1% in what could be its worst day in two decades after it said its
profitability weakened during the summer because of discounts needed to clear
suddenly overstuffed warehouses. The amount of shoes and gear in Nike’s
inventories swelled by 44% from a year earlier.
This year’s
powerful surge for the U.S. dollar against other currencies also hurt Nike. Its
worldwide revenue rose only 4%, instead of the 10% it would have if currency
values had remained the same.
Nike isn’t
the only company to see its inventories balloon. So have several big-name
retailers, and such bad news for businesses could actually mean some relief for
shoppers if it leads to more discounts. It echoed some glimmers of
encouragement buried within Friday’s report on the Fed’s preferred gauge of
inflation. That showed some slowing of inflation for goods, even as price gains
kept accelerating for services.
Another
report on Friday also offered a glimmer of hope. A measure of consumer
sentiment showed U.S. expectations for future inflation came down in September.
That’s crucial for the Fed because tightly held expectations for higher
inflation can create a debilitating, self-reinforcing cycle that worsens it.
Treasury
yields eased a bit on Friday, letting off some of the pressure that’s built on
markets.
The yield on
the 10-year Treasury fell to 3.75% from 3.79% late Thursday. The two-year
yield, which more closely tracks expectations for Fed action, sank to 4.16%
from 4.19%.
Still, a
long list of other worries continues to hang over global markets, including
increasing tensions between much of Europe and Russia following the invasion of
Ukraine. A controversial plan to cut taxes by the U.K. government also sent
bond markets spinning recently on fears it could make inflation even worse.
Bond markets calmed a bit only after the Bank of England pledged mid-week to
buy however many U.K. government bonds are needed to bring yields back down.
The stunning
and swift rise of the U.S. dollar against other currencies, meanwhile, raises
the risk of creating so much stress that something cracks somwhere in global
markets.
Stocks
around the world were mixed after a report showed that inflation in the 19
countries that use Europe’s euro currency spiked to a record and data from
China said that factory activity weakened there.
AP Business
Writers Joe McDonald and Matt Ott contributed.