Monday, March 27

Dow falls 1,000 points as markets extend their slide into 2022

NEW YORK (AP) — The Dow Jones Industrial Average fell more than 1,000 points Monday as financial markets gave in to anticipation of the Federal Reserve’s inflation-fighting measures and worried about the possibility of a conflict between Russia and Ukraine.

Stocks extended their three-week decline on Wall Street and put the benchmark S&P 500 index on track for a presumed correction — a drop of 10% or more from its most recent high. The price of oil and bitcoin fell, as did the yield on 10-year Treasury bonds, a sign of investors’ concern about the economy.

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Stocks have fallen sharply so far this year as the market braces for the Fed to raise interest rates to try to rein in inflation, which is at its highest level in nearly four decades. The central bank has kept short-term rates close to zero since the pandemic hit the global economy in 2020.

The S&P 500 fell 3.7% to 4,235.69 by 12:30 p.m. ET, and is now 11.1% below the closing high it set on Jan. 3. A close of 4,316.90 or below will put you in a correction. The Dow fell 2.9% to 33,236.25 and the Nasdaq fell 4.3%.

Technology stocks again led the broadest decline in the market as investors pulled money away from more expensive stocks in anticipation of rising interest rates. Higher rates make high-flying technology stocks and other expensive growth stocks relatively less attractive.

Apple fell 3.3% and Microsoft lost 4.8%. The technology sector is by far the largest in the S&P 500 and is now down more than 15% year-to-date.

The liquidation has spread to cryptocurrencies. At noon, Bitcoin was trading at $35,347, down 2.6%. Bitcoin traded above $68,000 in November.

The market is awaiting news from the Federal Reserve’s monetary policy makers after their latest meeting on Wednesday ends. Some economists have expressed concern that the Fed is already moving too late to combat high inflation.

Other economists say they worry the Fed may act too aggressively. They argue that numerous rate hikes would risk causing a recession and would not, in any case, curb inflation. In this view, high prices primarily reflect tangled supply chains that Fed rate hikes cannot cure.

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When the Fed raises its short-term rate, it tends to make borrowing more expensive for consumers and businesses, slowing down the economy in an attempt to reduce inflation. That could reduce the company’s earnings, which tend to dictate long-term share prices.

The Fed’s short-term benchmark interest rate is currently in a range of 0% to 0.25%. Investors now see a nearly 65% ​​chance the Fed will raise the rate four times by the end of the year, up from a 35% chance a month ago, according to CME Group’s Fed Watch tool.

Wall Street anticipates the first interest rate hike in March. In a note to clients over the weekend, Goldman Sachs forecast four rate hikes this year, but said the Fed could be forced to raise rates five times or more if supply chain problems and growth in wages keep inflation high.

Investors are also keeping an eye on developments in the Ukraine. Tensions rose Monday between Russia and the West over concerns Moscow plans to invade Ukraine, with NATO outlining possible deployments of troops and ships.

Europe’s STOXX 600 index closed down 3.6% on concerns about the Federal Reserve tightening and concerns about the situation around Ukraine. The Russian ruble has also fallen after US President Joe Biden indicated that in the event of a Russian invasion, the United States could block Russian banks’ access to dollars or impose other sanctions.

In US markets, healthcare stocks also fell sharply on Monday, along with a wide range of retailers. Target fell 1.9% and Pfizer lost 4.4%.

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Bond yields fell. The 10-year Treasury yield fell to 1.72% from 1.74% on Friday. The drop in yields hit banks, which rely on higher yields to charge more lucrative interest on loans. Bank of America fell 4.4%.

Inflation is putting pressure on businesses and consumers as demand for goods continues to outstrip supply. Companies have been warning that supply chain problems and rising raw material costs could hit their finances. Retailers, food producers and others have been raising the prices of goods to try to offset the impact.

Rising costs are raising concerns that consumers will begin to cut back due to persistent pressure on their wallets.

Investors are monitoring the latest round of corporate earnings, in part, to gauge how companies are coping with higher prices and what they plan to do as inflation continues to pressure operations.

On Tuesday, American Express, Johnson & Johnson and Microsoft report the results. Boeing and Tesla report their results on Wednesday. McDonald’s, Southwest Airlines and Apple report the results on Thursday.

Wall Street also has several key economic reports to look forward to this week. Investors will get more data on how consumers are feeling with the release on Tuesday of The Conference Board’s consumer sentiment index for January. The Commerce Department releases its fourth-quarter gross domestic product report on Thursday and its December personal income and spending report on Friday.

Associated Press economics writer Christopher Rugaber and reporters Stan Choe and David McHugh contributed.

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