Wall Street’s losing streak continues: it closed with losses again and had its worst week of the year

Stocks fell on Wall Street on Friday as grim evidence continued to pile up inflation is not cooling as quickly as expected.

He S&P500 fell 1.1%, already had its worst week since early December his third straight weekly loss. index Dow Jones it fell 1.1%, while the Nasdaq Composite Index lost 1.7%.

Inventories fell during the month of February due to a series of reports showing that everything from inflation to the labor market to consumer spending remains above expectations. This has forced Wall Street to raise its forecast of the level of interest rates the Federal Reserve will have to raise and the time it will have to maintain them.

Higher rates can reduce inflation, but they also increase the risk of recession Because they slow down the economy. Besides, adversely affect stock prices and other investments.

The latest reminder came on Friday, after a report showed the Federal Reserve’s favorite inflation measure it was higher than expected. Prices rose 4.7% in January from a year earlier, excluding food and energy costs, which can swing faster than others. This is an acceleration from December’s inflation rate, which showed poor momentum and beat economists’ expectations of 4.3%.

He echoed other reports earlier in the month showing consumer and wholesale inflation was higher than expected in January.

Other data on Friday showed spending per consumers it increased again in January, 1.8% more than in December. This data is critical because consumer spending is the bulk of the economy. Other consumer confidence data came in slightly better than expected, while new home sales improved a bit more than expected.

This solidity, together with the remarkable resistance of the labor marketgives hope that the economy can avoid a recession in the short term.

But it can also feed upward pressure on inflationand Wall Street worries that this will push the Federal Reserve to raise rates further and hold them there even longer than it otherwise would.

“This puts the final nail in the coffin of the turnaround we have seen in recent weeks, where the market accepted what the Federal Reserve has been saying for a while: rates above 5% and longersaid Ross Mayfield, investment strategy analyst at Baird.

Having previously doubted that the Federal Reserve will eventually raise its overnight rate as much as it announced, and that it might even cut rates at the end of the year, traders are stepping up bets that that the Federal Reserve rate will rise at least until 5.25% and it will remain so high until the end of the year.

It is currently in a range of 4.50% to 4.75%and a year ago it was practically zero.

Higher rates increase the risk of recession, even though most of the economy has held up.

“The consumer is holding up, but the consensus seems to be that there’s a lot of down buying” of cheaper items, Mayfield said. “If you wait a year and have confidence that the consumer sector will hold up, with each passing month it gets more complicated.”

Mayfield expects the economy’s growth to fall below its long-term trend, or even a minor recession, although he is not predicting a worst-case scenario.

Expectations of a tougher Federal Reserve have pushed Treasury market yields higher this month, and they are even higher on Friday.

The performance of the 10 year cash rose to 3.94% from 3.89% on Thursday. Helps set interest rates on mortgages and other large loans. The two-year yield, which is moving more in line with the Federal Reserve’s expectations, fell from 4.71% to 4.78%.

Stock markets overseas were also mostly down, with France’s main index down 1.8% and Hong Kong’s down 1.7%.

The Japanese Nikkei 225 was the exception, up 1.3%. Economist Kazuo Ueda, appointed head of the country’s central bank, told lawmakers he favors keeping Japan’s benchmark interest rate close to zero to ensure stable growth. This is despite Japan reporting that its core consumer price index, which excludes volatile fresh foods, posted the biggest gain in 41 years in January.

(With AP information)

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