cloudyn.png
Tuesday October 4th, 2022 2:38AM

Global markets fall sharply on worries about rates, economy

By The Associated Press
Related Articles
  Contact Editor

Stocks tumbled worldwide Friday on more signs the global economy is weakening, just as central banks raise the pressure even more with additional interest rate hikes.

The S&P 500 fell 2.2% in early afternoon trading, adding a dismal cap on what’s already been a rough week. It’s almost all the way back to its lowest point of the year, reached in mid-June, as Wall Street remains mired in its bear market. The Dow Jones Industrial Average is nearly 20% below its record set early this year. If it closes at or below that level, it would join other major indexes that already passed the threshold.

European stocks fell just as sharply or more after preliminary data there suggested business activity had its worst monthly contraction since the start of 2021. Adding to the pressure was a new plan announced in London to cut taxes, which sent U.K. yields soaring because it could ultimately force its central bank to raise rates even more sharply.

The Federal Reserve and other central banks 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.

“Financial markets are now fully absorbing the Fed’s harsh message that there will be no retreat from the inflation fight,” Douglas Porter, chief economist at BMO Capital Markets.

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. Meanwhile the U.S. dollar has been moving sharply higher against other currencies. That can hurt profits for U.S. companies with lots of overseas business, as well as put a financial squeeze on much of the developing world.

The Dow Jones Industrial Average fell 602 points, or 2%, to 29,489 and the Nasdaq fell 2.1% as of 12:05 p.m. Eastern. Smaller company stocks did even worse. The Russell 2000 fell 3%. U.S. crude oil prices slipped 6.1% and weighed heavily on energy stocks.

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 4.4% by the year’s end, a full point higher than envisioned in June.

Treasury yields have climbed to multiyear highs as interest rates rise. The yield on the 2-year Treasury, which tends to follow expectations for Federal Reserve action, rose to 4.20% from 4.12% late Thursday. It is trading at its highest level since 2007. The yield on the 10-year Treasury, which influences mortgage rates, slipped to 3.68% from 3.71%.

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. The problem is that many analyst are beginning to cut their forecasts for upcoming earnings because of higher rates and worries about a possible recession.

In the U.S., the jobs market has remained remarkably solid, and many analysts think the economy grew in the summer quarter after shrinking in the first six months of the year. But the encouraging signs also suggest the Fed may have to jack rates even higher to get the cooling needed to bring down inflation.

Some key areas of the economy are already weakening. Mortgage rates have reached 14-year highs, causing sales of existing homes to drop 20% in the past year. But other areas that do best when rates are low are also hurting.

In Europe, meanwhile, the already fragile economy is dealing with the effects of war on its eastern front following Russia’s invasion of Ukraine. The European Central Bank is hiking its key interest rate to combat inflation even as the region’s economy is already expected to plunge into a recession. And in Asia, China’s economy is contending with still-strict measures meant to limit COVID infections that also hurt businesses.

While Friday’s economic reports were discouraging, few on Wall Street saw them as enough to convince the Fed and other central banks to soften their stance on raising rates. So they just reinforced the fear that rates will keep rising in the face of already slowing economies.

——

Economics Writer Christopher Rugaber and Business Writers Joe McDonald and Matt Ott contributed to this report.

  • Associated Categories: Associated Press (AP), AP National News, AP Online National News, Top General short headlines, AP Business, AP Business - Economy, AP Business - Financial Markets, AP Business - Industries, AP Business - Financial Services, AP Business - Utilities
© Copyright 2022 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
UK cuts taxes, boosts spending, accelerating pound's slide
The British pound has went on its biggest one-day drop in 2 1/2 years after the U.K.’s new government outlined plans to cut taxes and boost spending
1:29PM ( 5 minutes ago )
Occupied Ukraine holds Kremlin-staged vote on joining Russia
A Kremlin-orchestrated referendum got underway in occupied regions of Ukraine that sought to make them part of Russia, with some officials carrying ballots to apartment blocks accompanied by gun-toting police
1:27PM ( 7 minutes ago )
Hurricane Fiona roars by Bermuda, on route to Canada
Hurricane Fiona pounded Bermuda with heavy rains and winds as it swept by the island and is forecast to approach northeastern Canada as a still-powerful storm late Friday
1:15PM ( 19 minutes ago )
Associated Press (AP)
Man wants to defend himself in fatal Wisconsin parade attack
A man accused of killing six people and injuring dozens of others by driving an SUV through a Christmas parade in Wisconsin last year wants to represent himself in a trial that is scheduled to begin in a little more than a week
1:01PM ( 33 minutes ago )
Pro-government rallies held in Iran amid mass protests
Iranian counterprotesters have gathered across the country in a show of support for authorities after nearly a week of anti-government protests and unrest
12:51PM ( 43 minutes ago )
Russian men join exodus, fearing call-up to fight in Ukraine
Military-aged men have joined an exodus from Russia on the second full day of a partial military mobilization
12:27PM ( 1 hour ago )
AP National News
Global markets fall sharply on worries about rates, economy
Stocks tumbled broadly on Wall Street and put major indexes on track for another deep weekly slump
10:32AM ( 3 hours ago )
Protesters fear climate change impact, demand aid for poor
Youth activists have staged a coordinated ‘global climate strike’ to highlight their fears about the effects of global warming and demand more aid for poor countries hit by wild weather
10:26AM ( 3 hours ago )
Hilary Mantel, author of 'Wolf Hall' Tudor saga, dies at 70
The Booker Prize-winning author of the acclaimed “Wolf Hall” trilogy has died
9:52AM ( 3 hours ago )
AP Online National News
US futures dragging Wall Street toward another down week
Wall Street careened toward another day of losses early Friday after more rate hikes by the Federal Reserve and other central banks spurred fears of a possible global recession and sent oil prices to their lowest level since the opening days of 2022
8:53AM ( 4 hours ago )
Tom Brady's TB12 Method is in schools. Experts have doubts.
Students in some Tampa Bay-area schools are using foam rollers and vibrating spheres to massage their muscles
8:06AM ( 5 hours ago )
Hilary Mantel, author of "Wolf Hall" Tudor saga, dies at 70
The Booker Prize-winning author of the acclaimed “Wolf Hall” trilogy has died
8:05AM ( 5 hours ago )
Top General short headlines
US allows tech firms to boost internet access in Iran
The Treasury Department says it will allow American tech firms to expand their business in Iran to boost internet access for the Iranian people
10:55AM ( 2 hours ago )
Indiana appeals judge's order blocking state's abortion ban
The state of Indiana has appealed a judge’s order that blocked the state’s abortion ban from being enforced
10:40AM ( 2 hours ago )
Denmark to allow 'significantly reduced' mink production
Denmark’s government says a temporary ban on mink breeding will expire Jan. 1, allowing mink production to resume in the country but at a ”significantly reduced” level compared to before the coronavirus pandemic
9:42AM ( 3 hours ago )
AP Business
AP Interview: Sudan ruling general won't run in elections
Sudan’s ruling military general says he will not run in future elections for a civilian-led government, but he offered no timeline on a vote that would clear the way for him to relinquish power
7:04AM ( 6 hours ago )
UK slashes personal, corporate taxes in bid to spur growth
Britain’s new government announced a sweeping plan of tax cuts it said would be funded by borrowing and revenues generated by anticipated growth, as part of contentious moves to combat the cost-of-living crisis and bolster a faltering economy
6:23AM ( 7 hours ago )
UK scraps corporate tax hike, lifts cap on banker bonuses
The U.K. government has scrapped a corporate tax hike and lifted a cap on bankers’ bonuses in a contentious bid to boost the faltering economy
4:58AM ( 8 hours ago )
AP Business - Economy
US stocks fall broadly as global central banks raise rates
Stocks fell on Wall Street and added to weekly losses for major indexes as central banks around the world hike interest rates to fight inflation
3:54PM ( 21 hours ago )
Bank of England raises rates but avoids bolder hike like Fed
The Bank of England has raised its key interest rate by another half-percentage point
10:54AM ( 1 day ago )
Bank of England hikes rates but avoids more aggressive step
Britain’s central bank has raised its key interest rate by another half-percentage point, avoiding more aggressive steps to tame inflation that the U.S. Federal Reserve and other banks have taken
10:01AM ( 1 day ago )
AP Business - Financial Markets
Biden vows US won't walk away from storm-struck Puerto Rico
President Joe Biden says the full force of the federal government is ready to help Puerto Rico recover from the devastation of Hurricane Fiona
11:14PM ( 14 hours ago )
Montana voters to decide on 'born alive' abortion bill
A referendum on the Montana ballot in November raises the prospect of criminal charges for health care providers unless they take all medically appropriate and reasonable actions to preserve the life of an infant born alive, including after an attempted abortion
6:39PM ( 18 hours ago )
Lawsuit: California utility targeted Asians in pot searches
A data privacy watchdog's lawsuit says a Northern California utility routinely fed customers’ power use information to police so they could target illicit marijuana grows, without requiring a warrant or suspicion of wrongdoing
5:47PM ( 19 hours ago )
AP Business - Industries
AP: Probe finds evidence of bank boss' romance with top aide
Investigators say they found evidence a former Trump official who heads Latin America’s biggest development bank carried on a romantic relationship with his chief of staff
11:26AM ( 1 day ago )
More Americans apply for jobless aid last week
The number of Americans filing for jobless benefits rose slightly last week despite the Federal Reserve’s year-long battle against inflation that’s intended to cool the economy and the tight labor market
8:59AM ( 1 day ago )
More Americans apply for jobless aid
The number of Americans filing for jobless benefits rose slightly last week despite the Federal Reserve’s year-long battle against inflation that’s intended to cool the economy and the tight labor market
8:46AM ( 1 day ago )
AP Business - Financial Services
France's Macron seeks 'massive' boost for renewable energy
French President Emmanuel Macron has called for a “massive acceleration” of renewable energy development in France, including offshore wind farms and solar power
9:58AM ( 1 day ago )
UK government lifts fracking ban despite opposition
Britain’s government has confirmed it is lifting a ban on fracking in England, arguing that the move will help boost the country’s energy security following Russia’s invasion of Ukraine
9:35AM ( 1 day ago )
UK government formally confirms lifting of fracking ban
Britain’s government has formally confirmed it is lifting a ban on fracking in England, arguing that the move will help boost the country’s energy security following Russia’s invasion of Ukraine
6:14AM ( 1 day ago )
AP Business - Utilities
UK cuts taxes, boosts spending, accelerating pound's slide
The British pound has went on its biggest one-day drop in 2 1/2 years after the U.K.’s new government outlined plans to cut taxes and boost spending
1:29PM ( 7 minutes ago )
Occupied Ukraine holds Kremlin-staged vote on joining Russia
A Kremlin-orchestrated referendum got underway in occupied regions of Ukraine that sought to make them part of Russia, with some officials carrying ballots to apartment blocks accompanied by gun-toting police
1:27PM ( 9 minutes ago )
Hurricane Fiona roars by Bermuda, on route to Canada
Hurricane Fiona pounded Bermuda with heavy rains and winds as it swept by the island and is forecast to approach northeastern Canada as a still-powerful storm late Friday
1:15PM ( 21 minutes ago )
Book shows personal side of 'Mockingbird' author Harper Lee
A new book shows the personal side of the late “To Kill a Mockingbird” author Harper Lee
1:10PM ( 26 minutes ago )
The AP Interview: Pakistani leader details flood devastation
Flooding likely worsened by climate change has submerged one-third of Pakistan’s territory and left 33 million of its people scrambling to survive
1:07PM ( 29 minutes ago )