U.S. stocks fell on Thursday morning after rising U.S. inflation fueled expectations of more rate hikes that investors are concerned about holding back economic growth.
Wall Street’s benchmark S&P 500 index was down 67 points, or 1.8%, at 3,734 as of 10:50 a.m. Thursday. The Dow Jones lost 566 points, or 1.8% to 30,206, and the tech-heavy Nasdaq fell 1.5%.
Investors fear that aggressive action by the Fed and other central banks to rein in inflation, which is at its highest level in four decades, could derail global growth.
“Growth fears are hitting markets harder than inflation fears,” Stephen Innes of SPI Asset Management said in a report.
On Wednesday, the S&P 500 lost 0.4%. The Dow Jones fell 0.7% and the Nasdaq composite fell 0.2%.
Traders expect another rate hike from the Fed this month, likely matching last month’s 0.75 percentage point hike, the biggest in 28 years and three times the usual margin.
Bank stocks were also hurt by weak earnings reports. JPMorgan Chase’s profits fell 28% in the second quarter, the bank reported Thursday, as it tries to navigate an economy that is showing strength in many areas but losing steam as interest rates rise. of interest to consumers and businesses.
Bank stocks have been hit hard this year as investors fear the Federal Reserve will put the U.S. economy in recession to fight inflation. A recession would mean that some Americans would lose their jobs and likely start falling behind on their loans. These fears more than compensated for the higher income that banks received from rising interest rates.
Fed officials say a recession is possible but not certain. They point to a strong US labor market despite higher borrowing costs.
Taking a more critical stance, CEO Jamie Dimon said in a statement that while the U.S. economy is growing and the labor market and consumer spending are strong, a number of factors “are very likely to have negative consequences for the world economy at some point”. “, including declining consumer confidence and the Federal Reserve’s efforts to rein in inflation, which has been high for decades.
“The U.S. consumer almost single-handedly keeps the global economy afloat,” Andrew Hunter, senior U.S. economist at Capital Economics, said in a research note in June. Recent Consumer Spending Data suggests that consumers have begun to reduce their spending on goods and services. Experts said this could be one of the first signs that inflation might be too high.
Traders eagerly await the latest quarterly results from major US corporations in the coming weeks.
In energy markets, benchmark U.S. crude fell $1.26 to $95.04 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 46 cents to $96.30 on Wednesday. Brent crude, the price basis for international oil trade, fell $1.06 to $98.51 a barrel in London. It added 8 cents the previous session at $99.57 a barrel.
