Shares dipped again on Thursday, with the S&P 500 heading towards its sixth consecutive weekly decline and moving ever closer to bear market territory as Wall Street continued to falter from a sell-off bout unlike any other investor has. seen for years.
The S&P 500 fell more than 1% in early trading Thursday, following a 1.7% drop on Wednesday. During the close on Wednesday, the index fell 4.6%, putting it on track for its largest weekly decline since at least January. This would also be the sixth consecutive weekly decline.
Tech stocks, which led the decline throughout the year, fell again. The Nasdaq composite fell 2%.
Though the Wall Street sell-off this year – which comes after the S&P 500 surged 90 percent in the previous three years – was triggered by concerns. rising inflation and interest rates, and what the combination might look like damage the economyhas taken on a life of its own as investors see each new data point as a cause for concern.
The most recent wave of sales has hit cryptocurrencies as well Bitcoinand metals and more commodities such as copper and oil, losses reflecting weakening sentiment in financial markets as well as concerns about the global economy. All of those were lower in early Thursday trading.
The drop has left the S&P 500 on the verge of a bear market, Wall Street’s deadline for a drop of 20% or more since its last peak, a label set to highlight just how gloomy mood has become among investors. As of Wednesday, the index was down 18% from its January 3 peak. The Nasdaq Composite is in bear market territory, down 29% from its November high.
This week’s drop came along with new updates on the pace of inflation in the US. The consumer price index rose 8.3% in the year to April from the previous year, the government said Wednesday, while a measure of the prices paid to producers rose 11%. While both measures showed that inflation has cooled slightly from the previous month, they are still at an unpleasant level.
For equity investors, inflation data directly feeds views on how aggressively the Federal Reserve will raise interest rates – higher finance costs will slow growth and also reduce interest in risky investments.
Analysts say the gloomy mood among equity investors will not change until they understand when the Fed, which raised its benchmark rate by half a percentage point this month and is expected to do so again when it meets in June and July will slow the rate hike. This will not be clear until it is certain that inflation has peaked.
“The Fed will want to see clearer evidence that inflation is cooling and that higher interest rates are slowing demand before starting to think about the end point of the current rate hike cycle,” wrote Bill Adams. Comerica Bank’s chief economist, in a note to clients Thursday.