Wells Fargo said the odds of a recession now stand at more than 50%
Author of the article:
Reuters
Shreyashi Sanyal and Medha Singh
The Federal Reserve’s biggest rate increase since 1994 to tame rising prices is fanning worries of a recession. Photo by REUTERS/Lucas Jackson/File Photo Stocks tumbled around the globe as recession fears resurfaced, with the Federal Reserve struggling to get on top of inflation that’s proved more persistent and widespread than officials anticipated.
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The relief rally that followed the Fed’s decision on Wednesday evaporated, with the majority of companies in the S&P 500 pushing lower. Big tech was knocked down as Treasury yields surged. Economic barometer Kroger Co. plunged after the supermarket chain said higher costs hurt margins.
After the opening bell, the Dow Industrial Average fell 768.97 points to 29,899.56, the S&P 500 was down 107.46 to 3,682.53 and the Nasdaq lost 323.53 to 10,775.62. In Canada, the TSX was down 424.10 to 19,187.46.
The Fed on Wednesday matched market expectations by hiking interest rates by 75 basis points. It also projected a slowing economy and rising unemployment in the coming months in the face of the worst inflation in 40 years.
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“We view it as increasingly likely that a recession and higher unemployment will be necessary to tame inflation: with such a gloomy macro picture looming over the markets,” said Geir Lode, head of global equities at Federated Hermes Limited.
Following the Fed meeting, Wells Fargo said the odds of a recession now stand at more than 50 per cent.
The Swiss National Bank raised its policy interest rate for the first time in 15 years in a surprise move on Thursday, while the Bank of England hiked borrowing costs by quarter of a percentage point.
The S&P 500 is down 20.5 per cent year-to-date and is in a bear market as investors grapple with a sharp slowdown in growth. The Nasdaq Composite and the S&P 500 indexes were set to mark their 10th weekly decline in past 11 weeks.
Additional reporting by Bloomberg
© Thomson Reuters 2022
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