Dow drops nearly 500 points to close at new low for 2022 on rising recession fears

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Stocks tumbled on Friday to cap a brutal week for financial markets as rising interest rates and currency turmoil fueled fears of a global recession.

The Dow Jones Industrial Average fell 486.27 points, or 1.62%, to 29,590.41. The S&P 500 fell 1.72% to 3,693.23, while the Nasdaq Composite fell 1.8% to 10,867.93.

The Dow hit a new yearly low, closing below 30,000 for the first time since June 17th. The 30-stock index ended the day 19.9% ​​below an intraday record and flirting with bear market territory. At one point, the Dow was down more than 826 points.

The major averages closed their fifth negative week in six with the Dow down 4%. The S&P and Nasdaq lost 4.65% and 5.07%, respectively. It was the fourth consecutive negative meeting for equities as the Fed issued another outsized 75 basis point rate hike on Wednesday and announced it would do another at its November meeting.

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“The market has clearly and rapidly moved from worries about inflation to worries about the Federal Reserve’s aggressive campaign,” said Quincy Krosby of LPL Financial. “You’re seeing bond yields rising to levels we haven’t seen in years — it’s changing the mindset of how the Fed gets price stability without breaking anything.”

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The British pound hit a new low of more than three decades against the US dollar after a new UK economic plan that included a series of tax cuts shook markets currently fearing inflation. The major European markets lost 2% on the day.

“This is a global macro mess that the market is trying to sort out,” Krosby said.

Bond yields soared this week following Fed action, with 2-year and 10-year Treasury rates hitting highs not seen in over a decade.

Goldman Sachs lowered its year-end target for the S&P 500 on rising interest rates and forecast a decline of at least 4% from there.

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Stocks positioned to suffer the most from a recession led the week’s losses, with the consumer discretionary sector of the S&P 500 falling 7%. Energy fell 9% as oil prices fell. Growth stocks including big tech names Apple, Amazon, Microsoft and Meta Platforms fell on Friday.

“Based on our client conversations, a majority of equity investors believe that a hard landing scenario is inevitable and their focus is on the timing, magnitude and duration of a potential recession and investment strategies for those prospects,” Goldman Sachs’ David Kostin wrote in a note to clients when he trimmed his outlook.

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