The good vibes on Wall Street are fading fast: US slid tumbled yet again on Friday as investors come to grips with a souring economy.
The Dow ended the day down 282 points, or 0.9%. The S&P 500 fell 1.1%, and the Nasdaq Composite was 1% lower.
The sell-off has been broad, but the real estate and consumer discretionary sectors were been hit the hardest, down more than 3% and 1.8%, respectively.
Is the Fed to blame? Sentiment on Wall Street can change on a dime, and this week is evidence of that: The Dow has tumbled about 1,050 points just since the Federal Reserve’s dour policy update at 2 p.m. ET Wednesday.
CNN Business’ Fear and Greed Index, a measure of market sentiment, finally dipped into “Fear” Friday. The market has been in “Greed” mode for weeks.
Stocks had been riding high this month on weaker-than-expected inflation and a number of stronger-than-expected reports on the broad economy and the job market. Investors were hopeful that the Federal Reserve could slow its historic pace of rate hikes and inflation could right itself sometime next year without tipping the economy into a recession.
That excitement continued right up until Fed Chair Jerome Powell crashed Wall Street’s party Wednesday with some tough news: Economists at the Fed believe US gross domestic product, the broadest measure of America’s economy, will barely grow next year.
And they predict the US unemployment rate will rise to 4.6% by the end of 2023, which means roughly 1.6 million more Americans will be out of work.
Compounding fears from those Fed forecasts was a worse-than-expected retail sales report Thursday that sent stocks plunging. The Dow lost 765 points Thursday, or 2.3%, the index’s worst day in three months. The S&P 500 lost 2.5% and the Nasdaq tumbled 3.2%, their worst days in a month.
Now, economists at Moody’s Analytics predict America’s economy will grow at an annualized rate of just 1.9% in the fourth quarter, down from its previous estimate of 2.7%. Weak manufacturing and retail reports spooked Moody’s analysts, who also lowered their 2023 GDP forecast to just 0.9%, much lower than 2022’s 1.9% estimate.
“This leaves little room for anything to go wrong,” Moody’s economist Matt Colyar wrote in an analysis.
Not helping stocks: It’s December. Many traders are on vacation, volume is low and tiny moves can get exacerbated.
As my colleague Matt Egan notes, the market may be in a lose-lose situation. Good economic news has been bad news for investors, because the Fed is trying to cool down the economy as part of its inflation-fighting campaign. But bad economic news is also bad for investors – and everyone – because it raises the risk of a recession.
(ADBE) and Facebook parent company Meta are the markets largest gainers today, up 3% and 2.8%, respectively. Adobe
(ADBE) shares soared after the company reported better-than-expected quarterly earnings and guidance. Meta, which is still down nearly 65% for the year, saw a tick after JPMorgan upgraded shares of the company to neutral from overweight.
– CNN’s Nicole Goodkind and Matt Egan contributed to this report