Global stocks fall, with the S&P 500 nearing bear market territory

Stocks fell Thursday following Wall Street’s worst day in nearly two years, amid growing concern about inflation’s impact on economic growth and company profitability.

The S&P 500 ticked down 0.6% after falling 4% Wednesday. The index sits just above the threshold for bear market territory, a Wall Street term for a 20% decline from a recent peak. This type of drop serves as a measure of investors’ pessimism about the market. Through Thursday, the S&P 500 had dropped 18.7% from its Jan. 3 peak.

Shares in Europe were also sharply lower. The Stoxx Europe 600 sank 1.4%, pulled lower by tech and consumer companies. Major indexes in European countries fell by more than 1%, with Britain’s FTSE 100 down 1.8%. The Nikkei 225 in Japan fell 1.9%, and the Hang Seng Index in Hong Kong dropped 2.5%.

Two concerns dominating financial markets are about the prospects for more aggressive interest rate increases by the Federal Reserve and how the economy is faring as the cost of everything from food to fuel rises quickly. On Wednesday, U.S. Treasury Secretary Janet Yellen said elevated prices were depressing both spending and economic output, creating what she called “stagflationary effects” around the world.

“This is an environment that is filled with risks, both with respect to inflation and also potential slowdowns,” Yellen said.

Sentiment on the market had lifted earlier in the week after a report showed consumer spending in the United States remained healthy, but those gains were erased after major companies, including Walmart and Target, reported that inflation was taking a toll on their profits.