Fears of a worldwide recession increased on Friday as rising interest rates and foreign currency volatility capped a tough week for financial markets.
The Dow Jones Industrial Average dropped more than 700 points to a fresh annual low of below 30,000. The 30-stock index has fallen 20% from its peak, which is considered a bear market on Wall Street. It last traded 600 points, or 2%, lower (at the moment this article was written). The S&P 500 plummeted 2.1% and was on track for a new closing low in 2022, while the Nasdaq Composite sank 2.1%.
The British pound fell to its lowest level against the U.S. dollar in more than three decades after a new U.K. economic plan that featured a series of tax cuts shook investors that fear inflation the most right now. The major European markets were down 2% for the day.
Friday was the fourth consecutive down session for the main averages. The Fed raised interest rates by 75 basis points on Wednesday and signaled that it will do so again at its November meeting.
Other central banks worldwide followed the Fed’s move
Britain, Switzerland, Turkey, and the Philippines all increased their interest rates in response to the Fed’s decision.
Following the Fed’s moves, bond yields jumped this week, with the 2-year and 10-year Treasury rates reaching levels not seen in almost a decade.
Goldman Sachs lowered its S&P 500 projection for the end of the year due to increasing interest rates, anticipating at least a 4% decline from here.
The consumer discretionary sector of the S&P 500 fell 7% this week, leading the week’s declines. These stocks are most vulnerable to a recession. The energy market has decreased by more than 9 percent as oil prices decline. Friday saw a decline in growth stocks, including Apple, Amazon, Microsoft, and Meta Platforms.
The main averages are on track to drop for the sixth time in the previous six weeks. This week, the Dow has lost around 4.5%, while the S&P and Nasdaq have lost 5.2% and 5.5%, respectively.
