Good vibes on Wall Street are fading fast: US fell again on Friday as investors grapple with a deteriorating economy.
The Dow Jones ended the day down 282 points, or 0.9%. The S&P 500 fell 1.1% and the Nasdaq Composite fell 1%.
The sell-off was widespread, but the real estate and consumer discretionary sectors were the hardest hit, down more than 3% and 1.8%, respectively.
Is the Fed to blame? Sentiment on Wall Street can change in no time, and this week is proof: the Dow has tumbled 1,050 points just since the Federal Reserve’s austere policy update at 2 p.m. ET on Wednesday.
CNN Business’ Fear and Greed Index, a measure of market sentiment, finally plunged into “fear” on Friday. The market has been in “Greed” mode for weeks.
Stocks were up this month on weaker than expected inflation and a number of stronger than expected reports on the economy at large and the the job market. Investors were hoping the Federal Reserve could slow its historic pace of rate hikes and inflation could pick up next year without tipping the economy into a recession.
That excitement continued until Fed Chairman Jerome Powell crashed the Wall Street party on Wednesday with some tough news: Fed economists believe U.S. gross domestic product, the broadest measure of the US economy, will barely increase next year.
And they predict that the unemployment rate in the United States will reach 4.6% by the end of 2023, which means that about 1.6 million more Americans will be out of work.
Fears heightened by these Fed forecasts have been worse than expected retail sales report on Thursday that sent stocks plunging. The Dow lost 765 points on Thursday, or 2.3%, the index’s worst day in three months. The S&P 500 lost 2.5% and the Nasdaq fell 3.2%, their worst days in a month.
Now Moody’s Analytics economists predict the US economy will grow at an annualized rate of just 1.9% in the fourth quarter, down from its previous estimate of 2.7%. Weak manufacturing and retail reports spooked Moody’s analysts, who also lowered their 2023 GDP forecast to just 0.9%, well below the 1.9% estimate for 2022. .
“That leaves little room for anything to go wrong,” Moody’s economist Matt Colyar wrote in an analysis.
Not helping equities: it’s December. Many traders are on vacation, volume is low, and small moves can be exacerbated.
As my colleague Matt Egan notes, the market can be in a lose-lose situation. The good economic news has been bad news for investors as the Fed attempts to calm the economy as part of its inflation-fighting campaign. But bad economic news is also bad for investors – and everyone else – because it increases the risk of a recession.
(ADBE) and Facebook’s parent company Meta are the biggest winners in the market today, up 3% and 2.8%, respectively. Adobe
(ADBE) Shares soared after the company reported better-than-expected quarterly results and guidance. Meta, which is still down nearly 65% for the year, saw a tick after JPMorgan upgraded the company’s stock to neutral from an overweight position.
– CNN’s Nicole Goodkind and Matt Egan contributed to this report