US Stocks Drop for 4th Monthly Fall this Year
Stock indices on Wall Street mostly ended low on Wednesday after another day of trading. The market is heading for its fourth monthly loss this year. The S&P 500 ended a 0.1% decline after shifting between small gains and losses. The Dow showed a 0.3% increase. Nasdaq Composite dropped less than 0.1%. Trading was volatile throughout the week, against growing signs that the economy may be heading for a recession. Stubbornly under pressure from high inflation and dramatically high-interest rates.
Investors have been able to hold U.S. government bonds, thereby lowering returns. 10-year treasury yields, which affect rates on mortgages and other consumer loans, fell to 3.10%, Which is a big step. Experts estimate that low returns because of more economic risk is not good for the market. The bulls must prove that they can maintain some strength beyond a few days or a week-long rally. The S&P 500 fell 3.72 points to 2.818.83. There is one day left until June; The benchmark index decreased by 7.6% per month and by 20% during the year.
The Dow rose to 31,029.31, up 82.32 points. The Nasdaq fell to 11,177.89, down 3.65 points. Stocks of small firms dropped, and investors were concerned about the economic rise. Russell 2000 decreased 19.47 points to a total of 1,719.37.
Stocks and the Fed
The government said the economy shrank at an annual rate of 1.6% in the first three months of the year; Its third and final estimate for GDP in the first three months of 2022. This number is in line with earlier estimates, and economists await an increase. Investors closely monitor economic data; When trying to determine how deeply inflation hurts consumers and businesses. At the same time, they are watching the aggressive change of the Federal Reserve System to raise interest rates.
The central bank is raising rates to slow economic growth to reduce inflation. However, Wall Street warns that the Federal Reserve could go too far and turn the economy into a recession. This concern was reinforced by reports showing a slowdown in retail sales and other indicators.
Consumers were seen as resilient amid rising prices earlier this year. However, this mood has disappeared. A recent review of GDP shows that consumer spending, which accounts for about two-thirds of economic output, was substantially weak than the government had previously calculated. It grew at an annual rate of 1.8% instead of the 3.1% estimated in May. Not only is the recession a basic case, but it has already begun.
Fed Chairman Jerome Powell reiterated in a Wednesday speech to the European Central Bank that he hoped the Fed could achieve so-called soft access, growing interest rates to slow the economy. Also, curb consumer price growth without challenge. Recession and a sharp rise in unemployment. However, he said achieving this goal has become more difficult. Consequently, there is no guarantee that the central bank will be able to curb uncertain inflation without harming the labor market.
Conclusion
Prolonged supply problems and a sharp jump in demand due to the disappearance of the pandemic have led to rising inflation. It has gotten worse over the years. Supply chain problems have worsened since the new shutdown in China to help control COVID-19 cases. Russia’s invasion of Ukraine has boosted energy prices. It also led to high gasoline prices, which consumed consumers’ wallets.
Consumers have shifted costs from discretionary items such as electronics to needs as inflation rises. The weaker-than-expected consumer confidence on Tuesday revealed that consistently high inflation makes Americans more pessimistic, both for the present and the future. The impact of cost change is a major focus for investors. Companies are starting to report on their latest financial results. General Mills rose 6.3% for the biggest gain in the S&P 500; After announcing solid financial results, It also gave investors an optimistic forecast.
Profits from healthcare and technology companies have helped boost the market. Eli Lilly grew by 1.7%. Microsoft added 1.5%. Energy stocks fell as the U.S. crude oil price fell 1.8%. Exxon Mobil fell 3.7%. Industrial firms and retailers also controlled market profits. FedEx sank 2.6%. Target by 1.8%. Bed Bath & Beyond fell 23.6% after the analysts announced a much bigger loss and replaced its CEO. Cruise lines were the biggest drop in the S&P 500. Carnival fell 14.1%. Royal Caribbean by 10.3% and Norway Cruise Line down by 9.3%.
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