Markets sold off around the world on mounting signs the global economy is weakening just as central banks raise the pressure even more with additional hikes to interest rates. The Dow Jones Industrial Average closed at its lowest point of the year Friday.
around the world aggressively hiked interest rates this week in hopes of undercutting high inflation, with more big increases promised for the future. But such moves also put the brakes on their economies, threatening recessions as growth slows worldwide. Besides Friday’s discouraging data on European business activity, a separate report suggested U.S. activity is also still shrinking, though not quite as badly as in earlier months.
Crude oil prices tumbled to their lowest levels since early this year on worries that a weaker global economy will burn less fuel. Cryptocurrency prices also fell sharply because higher interest rates tend to hit hardest the investments that look the priciest or the most risky.Even gold fell in the worldwide rout, as bonds paying higher yields make investments that pay no interest look less attractive. Meanwhileagainst other currencies. That can hurt profits for U.S.
More than 90% of stocks in the S&P 500 were in the red, with technology companies, retailers and banks among the biggest weights on the benchmark index. The major indexes are on pace for their fifth weekly loss in six weeks.The Federal Reserve on Wednesday lifted its benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%. It was at virtually zero at the start of the year. The Fed also released a forecast suggesting its benchmark rate could be 4.
The higher rates mean Goldman Sachs strategists say a majority of their clients now see a “hard landing” that pulls the economy sharply lower as inevitable. The question for them is just on the timing, magnitude and length of a potential recession.Higher interest rates hurt all kinds of investments, but stocks could stay steady as long as corporate profits grow strongly.
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