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NEW YORK (AP) — Stocks slumped in afternoon trading on Wall Street on Thursday as sustained high inflation continues to weigh on the economy and keeps major indexes in deep slump.
The benchmark for many index funds, the S&P 500 is coming out of its biggest drop in nearly two years. It eased an early stumble and was down 0.1%. It’s down roughly 18% from the record level it set earlier this year. This falls slightly behind the 20% point that defines the bear market. The last bear market occurred just two years ago, after the virus pandemic began.
The Dow Jones Industrial Average fell 127 points, or 0.4%, to 31,363 in the East at 14:01, and the Nasdaq rose 0.3%.
Rising interest rates, high inflation, the war in Ukraine and the slowdown in the Chinese economy have caused investors to reconsider the prices they are willing to pay for a wide variety of stocks, from hi-tech companies to traditional automakers. Investors are worried that rising inflation, which is hurting people shopping for groceries and filling their cars, is also hurting corporate profits.
Target fell another 5% per day after losing a quarter of its value on a surprisingly weak profit report.
Wall Street is also worried about the Federal Reserve’s plan to tackle the highest inflation rate in four decades. The Fed is raising interest rates aggressively, and investors worry that if the central bank raises rates too high or too quickly, it could cause a recession.
The 10-year Treasury fell from 2.88% to 2.84% late Wednesday, but is generally rising as investors prepare for a market with higher interest rates. This also increased mortgage rates, which contributed to the slowdown in home sales.
The heap of anxiety on Wall Street has created very volatile trading on any given day and huge fluctuations between gains and losses.
Technology stocks have been some of the most volatile holdings. The industry includes heavyweights like Apple with higher valuations that tend to push the market up or down more strongly. The industry was particularly affected by the Fed’s policy change to increase interest rates. Lower rates help support investments considered riskier, such as technology stocks, and higher rates reduce the incentive to take that risk.
Tech shares were mixed on Thursday, adding to the volatile market. Cisco Systems fell 13.9% after the router and switch vendor cut its profit forecast due to supply chain constraints. The summary rose 12.2% after the software company upgraded its financial forecasts for the year.
Houseware companies, grocery store operators, and food manufacturers fell broadly. General Mills fell 2.3% and Clorox fell 4.2%.
Retailers and other companies that relied on direct consumer spending were mostly higher. Amazon was up 1.2% and Expedia was up 6.4%. Bath & Body Works fell 7% after lowering its profit forecast for the year.
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