By DAMIAN J. TROISE and ALEX VEIGA
Markets sold off around the world on mounting signs the global economy is weakening just as central banks raise the pressure even more with additional hikes to interest rates. The Dow Jones Industrial Average closed at its lowest point of the year Friday. The S&P 500 fell 1.7%, close to its 2022 low. Energy prices also closed sharply lower as traders worried about a possible recession. Treasury yields, which affect rates on mortgages and other kinds of loans, held at multiyear highs. U.K. government bond yields snapped higher after that country’s new government announced a sweeping plan of tax cuts.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
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% in afternoon trading, adding a dismal cap on what’s already been a rough week. It’s close to its low point of the year in mid-June.
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, wrote in a research report.
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 505 points, or 1.7%, to 29,572 and the Nasdaq fell 1.9% as of 3:43 p.m. Eastern. Smaller company stocks did even worse. The Russell 2000 fell 3%. U.S. crude oil prices slid 5.7% and weighed heavily on energy stocks.
More than 90% of stocks in the S&P 500 were in the red, with technology companies, retailers and banks among the biggest weights on …read more
Source:: The Mercury News – Latest News
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