(AmericanProsperity.com) – Rising interest rates to combat inflation are causing multiple sectors of the economy to tumble, including mortgage rates and stocks, according to Newsmax. Wall Street is reportedly feeling the squeeze as speculation continues to grow that the Federal Reserve is going to raise rates amid “stronger-than-expected” retail sales and labor market data.
The three largest players felt the brunt of the downturn. The S&P 500 dropped 2%, which is the sharpest drop since December 2022. The Dow Jones Industrial Average dropped 2.1% or 697 points. The NASDAQ fell the most at 2.5%.
Various factors are contributing to an uncertain marketplace. On the one hand, companies rising their costs are worrying investors, who see that as cutting into profits, even in cases where profits were reportedly strong. For example, Home Depot experienced one of the largest declines last week, falling 7.1% even though it had strong profit growth in the last three months, because of its commitment to invest $1 billion into increasing wages for its employees.
On the other hand, rising interest rates are signaling a recession because they usually slow the economy. As bonds are offering higher yields, less safe investments offering lower margins of profit, such as stocks, do not appear as appealing. Stocks are also more expensive since 2007, according to strategists at Morgan Stanley.
The Federal Reserve, which has been focused on combatting inflation, recently raised interest rates from 4.50% to 4.75%, a major difference when it was nearly zero around the same time last year.
In November, researchers at Goldman Sachs warned of an impending recession, speculating that the U.S. faces a 39% chance of a slowdown of growth. But other reports suggest that the economy is in good shape, which might mean that the Fed will look to keep its campaign of high rates.
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