NEW YORK (AP) – Shares have ended another very high day on Wall Street but continue to lose their biggest weekly losses since March 2020, when markets enter freely at the beginning of the coronavirus closure. The S&P 500, the benchmark for most index funds in 401 (k) accounts, rose 0.2% on Friday. It still lost 5.8% per week, its 10th weekly loss in the last 11. The Dow fell 0.1% and the Nasdaq added 1.4%. Markets around the world have been shaken as investors become accustomed to the bitter high-interest-bearing drug that central banks continue to undertake to combat inflation.
Fear of inflation weighed heavily on the stock market
Markets around the world have been shaken as investors become accustomed to the bitter interest rate of the Federal Reserve and other central banks. Higher prices can lower inflation, but they also pose a risk of recession by lowering the economy and lowering stock prices, cryptocurrencies and almost all investments.
The S&P 500 is still in the bear market after earlier this week dropped more than 20% below its record. It is now almost 23% below its highest set in January and has returned to where it was at the end of 2020.
Increased Fed interest rate affecting S&P 500
A major concern for investors has been whether the sharp rise in interest rates from the Federal Reserve and other central banks around the world would lower the record-breaking inflation rate without pressure on the U.S.
On Wednesday, the Fed increased its short-term interest rate by three times the rate of a sharp increase since 1994. It may consider another major increase at its next meeting in July, but Fed Chairman Jerome Powell said a 3-per cent increase would not be the norm.
The Fed has also recently begun to allow some of the billions of dollars in bonds it has bought to drain its balance sheet. That should put increasing pressure on long-term interest rates and is another way central banks support sub-market markets to strengthen the economy at the start of the epidemic.
INCREASE IN INCREASES: Federal Reserve raises the interest rate by 0.75% to curb inflation
THIS WEEK’S CHOICE: S&P 500
Rising interest rates, bear market, crypto crashes, and more are happening this week. This is what it says.
Fed measures are taking place as other disappointing signs of the economy have emerged; such as reducing sales to American retailers, even if the labour market remains strong. That has raised concerns that the Fed’s actions could end up being very aggressive.
Powell will testify before Congress next week on monetary policy, and his comments will guide trade. The evidence is scheduled for Wednesday and Thursday, which could mean many climbs on Wall Street.
In the six days since the game-changing report showed the US inflation was growing; not as low as investors had hoped, the S&P 500 had a three-day decline of at least 2.9%. That happened only five times in the last year.
At least on Friday, trading was calm as Treasury yields were excellent from high levels; over a decade and some panic on Wall Street sank.
10-year Treasury interest rate declined to 3.23% from 3.30% at the end of Thursday; from a peak of almost 3.50% earlier in the week.
Higher yields have been making all sorts of investments this year, but the severe pain has hit cryptocurrencies; high-tech stocks and other high-flying aircraft in the past, and simple ultralow rates.
Which stocks do best?
Profits in technology stocks on Friday helped Nasdaq lead the market. Microsoft increased by 2%, while Amazon increased by 2.6%.
Some stocks were hit hardest on Thursday due to concerns about a possible collapse; inflation beyond consumer spending also recurred. The Norwegian Cruise Line increased by 9.4%, while the American Airlines Group gained 6.8%. Both are still less than 10% per week, however.
Shares of small companies, which often move higher than expected U.S. economic power, are also performing better than other markets. The Russell 2000 index for small shares was up 1.3%. But was also significantly lower per week than the broader market.