Late rally yanks Wall Street from maw of bear market
NEW YORK – Wall Street rumbled to the edge of a bear market Friday after another drop for stocks briefly sent the S&P 500 more than 20% below its peak set early this year.
The S&P 500 index, which sits at the heart of most workers’ 401(k) accounts, was down as much as 2.3% for the day before a furious comeback in the final hour of trading sent it to a tiny gain of less than 0.1%. It finished 18.7% below its record, set on Jan. 3. The tumultuous trading capped a seventh straight losing week, its longest such streak since the dot-com bubble was deflating in 2001.
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%, at 31,261.90. The Nasdaq composite trimmed a big loss to finish 33.88 points lower, or 0.3%, at 11,354.62. The Russell 2000 index of smaller companies fell 2.96 points, or 0.2%, to 1,773.27.
Many big tech stocks, seen as some of the most vulnerable to rising interest rates, have already fallen much more than 20% this year. That includes a 37.2% tumble for Tesla and a 69.1% nosedive for Netflix.
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% from 2.85% late Thursday. Goldman Sachs economists recently put the probability of a U.S. recession in the next two years at 35%.
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 secondlargest 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.
Adding pressure onto stocks have been signs that corporate profits are slowing and may finally be getting hurt by inflation. That means the pain has widened beyond tech and high-growth stocks to encompass more of Wall Street.
Retail giants Target and Walmart both had warnings this week about inflation cutting into finances. Discount retailer Ross Stores sank 22.5% on Friday after cutting its profit forecast and citing rising inflation as a factor.
Gold for June delivery rose 90 cents to $1,842.10 an ounce. Silver for July delivery fell 24 cents to $21.67 an ounce, and July copper was unchanged at $4.28 a pound.
The dollar rose to 127.83 Japanese yen from 127.74 yen. The euro fell to $1.0546 from $1.0598.