US: S&P 500 sinks 3.9%, ending in ‘bear market’ amid inflation worries
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WALL Street stocks officially entered “bear market” territory on Monday following another drubbing as investors bet on more aggressive Federal Reserve rate hikes to address inflation.
The S&P 500, the broad-based equity index, plummeted 3.9 per cent to finish the day at 3,749.53, a drop of more than 20 per cent from its most recent peak on Jan 4 – the definition of a bear market.
The Dow Jones Industrial Average lost 2.8 per cent to end at 30,516.74, while the tech-rich Nasdaq Composite Index fell 4.7 per cent to 10,809.23. It was Wall Street’s fourth straight day of losses and comes ahead of Wednesday’s Fed decision.
More market watchers believe the US central bank will need to ratchet up its monetary tightening in light of Friday’s consumer price index report. CPI jumped 8.6 per cent compared to May 2021, hitting a fresh 40-year high, topping expectations and dashing hopes that price pressures had peaked.
The Fed has signaled plans for a second large 0.5 percentage-point interest rate hike on Wednesday. But more voices are projecting a three-quarter point increase. Barclays said the more aggressive move was called for “to reinforce credibility and get ahead of inflationary pressures.”
The Fed’s increasingly aggressive posture “is causing indigestion for the markets,” said Angelo Kourkafas, investment strategist at of Edward Jones.
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The concerns sent the yield on the 10-year US Treasury note, a proxy for interest rates, above 3.3 per cent, the highest level in more than 11 years.
Beyond the concerns about US inflation, analysts also pointed to worries about the continued drag of Covid-19 on the Chinese economy and the global supply chain.
Beijing started a new round of mass testing in its most populous downtown district after a rapidly spreading outbreak linked to a bar saw Covid rules tightened again in the capital. All 11 sectors of the S&P 500 finished with losses of more than two per cent.
Among large companies, Apple fell 3.8 per cent, Disney lost 3.7 per cent and Boeing slumped 8.9 per cent. AFP
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