NEW YORK (AP) – Shares fell sharply as investors anticipated action by the Federal Reserve to fight inflation. And concern about the possibility of conflict between Russia and Ukraine.
The stock market extended its three-week slump Also, keep the benchmark S&P 500 on track for a so-called correction – a 10% or more drop from its most recent high. Oil prices And the fall in bitcoin, and the yield of 10-year treasury notes, a sign of investor concern about the economy.
Shares have plummeted so far this year as the central bank signals its readiness to begin raising its key short-term interest rates in 2022 to curb inflation, which has been at a four-decade high. The central bank’s short-term ratio has been close to zero since the global economy took hold in 2020, and this has spurred borrowing and spending by consumers and businesses.
The central bank has put downward pressure on long-term interest rates by buying trillions of dollars worth of government and corporate bonds, but those emergency purchases will end in March. Raising higher rates aimed at helping to slow economic growth and inflation.
Early in the afternoon, the Dow fell 721 points, or 21%, to more than 1,000 points, up 33,544 points. The S&P 500 was down 2.6% at 4,285, now down 10.7% from the January 3 close. If it is 4,316.90 or less it will be a correction. The Nasdaq fell 2.8%.
“There is a short-term panic and as a part of it there is a lot of uncertainty about what the central bank is going to do,” said Sylvia Zaplonsky, chief investment officer at Defiance ETFs.
Japlonsky said investors were not in a hurry to buy shares during the recent downturn. “Going the Dip” has been a sign of market optimism for most of the period following the 2008-2009 financial crisis.
Technology stocks again caused a wide decline in the market as investors shifted money from expensive stocks in anticipation of rising interest rates. Higher rates make stocks of high-flying technology companies and other expensive growth stocks relatively less attractive.
Apple fell 3.1% and Microsoft 3.3%. Nvidia, in 2021, fell 7.4% to more than 26% in January. The technology sector is the largest in the S&P 500, and has shrunk by more than 14% so far this year.
The sale has been extended to cryptocurrencies. Bitcoin fell to $ 33,000 overnight, but returned over $ 36,000 in the afternoon. Yet the digital currency is much lower than the $ 68,000 it reached in November.
The market is waiting to hear from Federal Reserve policymakers Their latest meeting ends Wednesday. Some economists have expressed concern that the central bank is already moving too late to combat high inflation.
Other economists say they are concerned that the central bank could act more aggressively. They argue that multiple rate hikes will cause a recession and not reduce inflation. In this perspective, higher prices reflect weaker supply chains that heal from the central bank’s rate hikes.
As the central bank raises its short-term rate, it makes borrowing more expensive for consumers and businesses, slowing the economy with the aim of reducing inflation. This can reduce the company’s revenue, which will dictate stock prices in the long run.
The central bank’s key short – term interest rate is currently between 0% and 0.25%. According to CME Group’s Fed Watch tool, investors now see a nearly 65% chance of the central bank raising the rate four times by the end of the year, from 35% a month ago.
Wall Street expects interest rates to rise for the first time in March. In a note to customers over the weekend, Goldman Sachs forecast four rate hikes this year, but said that if supply chain problems and wage growth kept inflation high, the central bank would be forced to raise rates five-fold or more.
Investors are also watching the progress of Ukraine. Tensions escalated on Monday Moscow plans to invade Ukraine, outlining NATO potential troops and naval deployments.
Europe’s STOXX 600 index fell 3.6%, amid concerns about central bank austerity and the situation around Ukraine. The Russian ruble has fallen following US President Joe Biden’s warning that the United States could block dollar access to Russian banks or impose other sanctions in the event of a Russian invasion.
In US markets, healthcare stocks also fell sharply on Monday, along with a wide range of retailers. The target fell 2.1% and Pfizer fell 4.1%.
Bond yields have declined. 10-year Treasury revenue fell to 1.72% from 1.74% in late Friday. Yields are declining in banks that rely on higher yields to charge higher profitable interest on loans. Bank of America fell 3.5%.
Inflation puts pressure on businesses and consumers because demand for goods is greater than supply. Companies are being warned that supply chain problems and rising raw material prices could paralyze their finances. Retailers, food manufacturers and others are raising the prices of goods in an attempt to offset the impact.
Rising costs raise concerns that consumers will begin to ease costs due to the constant pressure on their wallets.
Investors have been monitoring recent corporate earnings, in part, on how companies are dealing with high prices and what they plan to do with the ongoing pressures on inflation.
On Tuesday, American Express, Johnson & Johnson and Microsoft announced the results. Boeing and Tesla will announce their results on Wednesday. McDonald’s, Southwest Airlines and Apple report results Thursday.
Wall Street also has several key economic statements to look forward to this week. With Tuesday’s release of the Convention Board’s Consumer Confidence Index for January, investors will receive additional information on how consumers feel. The Department of Commerce on Thursday released its fourth-quarter GDP report and its per capita income and expenditure report for December.
Associated Press correspondents include Christopher Rugaber in Washington, Stan Chow in New York, and David McHugh in Frankfurt.
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