Fed looks unlikely to come to rescue

Inflation, global unrest punish stocks, stoke Wall Street’s fears

NEW YORK — Rising interest rates, high inflation, the war in Ukraine, and a slowdown in China’s economy are all punishing stocks and raising fears about a possible U.S. recession. Compounding worries is how the superhero that’s flown to Wall Street’s rescue in the most recent downturns, the Federal Reserve, looks less likely to help as it’s stuck battling the worst inflation in decades.

The S&P 500 finished the day up 0.57 points at 3,901.36. The Dow Jones Industrial Average swung from an early loss of 617 points to close 8.77 higher, or less than 0.1 percent, at 31,261.90. The Nasdaq composite trimmed a big loss to finish 33.88 points lower, or 0.3 percent, at 11,354.62.

Because the S&P 500 did not finish the day more than 20 percent below its record, the company in charge of the index says a bear market has not officially begun. Of course, the 20 percent threshold is an arbitrary number.

Many big tech stocks, seen as some of the most vulnerable to rising interest rates, have already fallen much more than 20 percent this year. That includes a 37.2 percent tumble for Tesla and a 69.1 percent nosedive for Netflix.

With inflation at its highest level in four decades, the Fed has aggressively turned away from keeping interest rates super-low in order to support markets and the economy. Instead it’s raising rates and making other moves in hopes of slowing the economy enough to tamp down inflation. The worry is if it goes too far or too quickly.

Bond yields fell as recession worries pushed investors into Treasurys and other things seen as safer. The yield on the 10-year Treasury note, which helps set mortgage rates, fell to 2.78 percent from 2.85 percent late Thursday. Goldman Sachs economists recently put the probabilty of a U.S. recession in the next two years at 35 percent.

Inflation has been painfully high for months.

But the market’s worries swung higher after Russia’s invasion of Ukraine sent prices spiraling further at grocery stores and gasoline pumps, because the region is a major source of energy and grains. The world’s second-largest economy, meanwhile, has taken a hit as Chinese officials locked down key cities in hopes of halting COVID-19 cases. That’s all compounded with some disappointing data on the U.S. economy, though the job market remains hot.