Dow falls more than 500 points, heads into new 2022, recession fears grow

Stocks fell on Friday and another losing week was on pace as bond yields rose and investors feared the Federal Reserve’s aggressive hiking campaign could push the economy into recession.

The Dow Jones industrial average fell 550 points, or 1.8%. The S&P 500 and Nasdaq Composite each fell 2%.

“The market is shifting clearly and quickly from concerns about inflation to concerns about an aggressive Federal Reserve campaign,” said LBL Financial’s Quincy Crosby. “You’re seeing bond yields rise to levels we haven’t seen in years — that changes the mindset of how the Fed gets to price stability without breaking something.”

Friday marked the fourth negative session in a row for the major averages, with the Dow falling below its June lows and hitting the 30,000 mark. The central bank implemented another super-sized rate hike of 75 basis points on Wednesday and indicated it would do another at its November meeting.

Bond yields rose this week following the Fed’s actions, with the 2-year and 10-year Treasury rates hitting highs not seen in a decade.

Goldman Sachs It cut its year-end S&P 500 target It predicts a decline of at least 4% from here as rates continue to rise.

Stocks most vulnerable to a recession led the S&P 500’s consumer discretionary sector to lose 7% this week. Energy fell more than 8% due to falling oil prices. Growth stocks fell on Friday, including big tech names Apple, Amazon, Microsoft and MetaPlatforms.

“Based on our client discussions, the majority of equity investors accept the view that a hard landing scenario is inevitable, and their focus is on the timing, size and duration of the recession and investment strategies for that outlook,” Goldman Sachs wrote. In a note to David Costin’s clients.

The major averages are on pace for their fifth decline in the past six weeks and are on track to end the week with losses. The Dow is up about 4.2% this week, while the S&P and Nasdaq are both down 4.9% and 5.2%, respectively.

In other news, the pound hit a new low in more than three decades against the US dollar after a new UK economic plan, including tax cuts, rocked markets.

“It’s a global macro mess that the market is trying to sort out,” Crosby said.

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