Wall Street falls more than 1,000 points on fear of the Fed and a recession

The Dow Jones index of the New York Stock Exchange dropped 1,164 points (3.

Thomas Osborne
Thomas Osborne
18 May 2022 Wednesday 17:51
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Wall Street falls more than 1,000 points on fear of the Fed and a recession

The Dow Jones index of the New York Stock Exchange dropped 1,164 points (3.6%) yesterday, in its biggest decline since the outbreak of the covid crisis in 2020, given investors' fear of a higher rise aggressive interest rate by the Federal Reserve (Fed) and that the economy is entering a recession. Even worse was the Nasdaq, the index of technology companies, which closed down 4.7%.

The Dow Jones brings together the 30 largest US companies and was dragged down by the poor results of Target, the eighth largest supermarket company in the country, which cut its sales and margin forecasts due to the impact of inflation, So the stock fell 27%. This dragged down other distribution companies such as Walmart (-6%), Costco (-12%) and Dollar Tree (-16%). Investors fear a fall in consumption, caused by the increase in inflation and the rise in rates, which in a country where it represents 70% of GDP would trigger a recession.

The big technology companies also resumed their falls, after three days of increases, damaged by the prospects of an aggressive rise in rates in companies that are still largely losing money. The Nasdaq accumulates losses of 22% since November.

Fed Chairman Jerome Powell warned on Tuesday that the central bank would "continue to boost" interest rates, even beyond their "neutral" value to curb rising inflation. Powell was even pleased that the stock market had responded adequately to the Fed's policy, when this response has been sharp falls.

A Verdence Capital Advisors report warned of inflation. "Already at the end of the year we started to see consumers turning to credit cards to pay for rising food and energy prices, and that's gotten a lot worse," said director Megan Horneman.

Big tech also succumbed to sales, with Amazon shedding 7% and Apple 6%.


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