Wall Street crashes on recession fears
US stocks extended their slide on Thursday as investors raised concerns that the economy might be headed for a recession.
The Benchmark S&P 500 index was down 1% after trading opened, while the Dow Jones Industrial Average dropped 0.8%, and the tech-heavy Nasdaq sank 1.3%, as of 16:30 GMT.
Analysts say that every major index is on track for a weekly loss after the heavy selloff on Wednesday when investor sentiment was hit by softer than expected retail sales data and a sharp decline in industrial production.
On Thursday, there were more signs of slowing economic activity. Weekly jobless claims unexpectedly fell to 190,000 last week, lower than the expected 214,000, adding to worries that the still tight labor market could convince the Fed to continue its aggressive rate hikes. The Commerce Department also said construction of new US homes fell by a seasonally adjusted 1.4% in December to 1.38 million.
“The bad [economic] news would normally be good news for the stocks, if the Federal Reserve members weren’t there to spoil the dovish Fed expectations by saying that the US rates should go higher,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, told the Market Watch.
The US central bank has maintained that it won’t ease off its fight against inflation until it is sure that prices are cooling. The regulator has raised its key overnight rate to a range of 4.25% to 4.50% from roughly zero a year ago. It will announce its next decision on interest rates on February 1. Meanwhile, economists and several major banks have been forecasting that higher interest rates could push the US economy into recession this year.
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