Stocks lost more ground Friday on Wall Street as worries grow that the Federal Reserve and other central banks are willing to bring on a recession if that’s what it takes to get inflation under control. The Dow fell 281 points to 32,920, the S&P 500 fell 43 points to 3,852, and the Nasdaq fell 105 points to 10,705. The losses in the market Friday were broad. More than 90% of companies in the benchmark S&P index fell, per the AP. Technology and health care stocks had some of the biggest losses. Microsoft fell 1.9%, and Pfizer slid 3.3%.
“Inflation continues to be the monster in the room," said Liz Young, head of investment strategy at SoFi. The Fed this week raised its forecast for how high it will ultimately take interest rates and tried to dash some investors’ hopes that rate cuts may happen next year. In Europe, the central bank came off as even more aggressive in many investors’ eyes. Inflation has been easing from its hottest levels in decades, but remains painfully high. That has prompted the Fed to maintain its aggressive attack on prices by raising interest rates to slow economic growth. The strategy increasingly risks slamming on the brakes too hard and sending an already slowing economy into a recession.
“Whether it's a mild, medium, or deep recession is still unknown," Young said. A mixed report from S&P Global on Friday highlighted the recession risk. It showed that business activity slowed more than expected this month as inflation squeezes companies. It also noted that it was the sharpest drop since May 2020, but that inflation pressures have also been easing. “In short, the survey data suggest that Fed rate hikes are having the desired effect on inflation, but that the economic cost is building and recession risks are consequently mounting,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
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