U.S. Stocks Extend Losing Streak as Rate Hike Fears Mount
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NEW YORK (AP) — U.S. stocks closed lower Thursday for a fifth straight week, marking the longest weekly losing streak for the Dow Jones Industrial Average and S&P 500 since 2022. The sell-off was driven by rising investor concerns over the Federal Reserve’s monetary policy stance and increasing odds of an interest rate hike.
The Dow Jones Industrial Average fell 1.2% to close at 39,842.15, while the S&P 500 dropped 1.4% to 5,210.33. The Nasdaq Composite, which has been more volatile due to its heavy weighting in technology stocks, declined 1.8% to 16,102.47. The five-week decline represents a significant shift in market sentiment, as investors grapple with persistent inflation data and signals from policymakers suggesting tighter monetary conditions may be necessary to cool the economy.
Market analysts point to recent economic indicators as the primary catalyst for the downturn. The Consumer Price Index released earlier in the week showed inflation ticking higher than expected, reigniting fears that the Federal Reserve may need to act more aggressively to bring prices under control. Bond yields rose in tandem with equity losses, with the 10-year Treasury yield climbing to 4.35%, its highest level in three months. Higher yields typically pressure stock valuations, particularly for growth-oriented sectors that rely on cheap capital.
The technology sector led the decline, with major components of the Nasdaq posting double-digit percentage drops. Semiconductor stocks were particularly hard hit, as investors reassessed the outlook for demand in the chip industry amid global economic uncertainty. Financials and energy stocks also contributed to the broader market weakness, though the damage was less severe compared to the tech-heavy indices.
Federal Reserve officials have maintained a cautious tone in recent public appearances, emphasizing that policy decisions will depend on incoming data. However, the market has interpreted this stance as a signal that the central bank is prepared to raise rates if inflation remains stubborn. Futures for the next Federal Open Market Committee meeting now price in a 75% probability of a quarter-point increase, up from 50% last week.
The prolonged decline has raised questions about the sustainability of the current market correction. Some analysts warn that further volatility could be on the horizon if inflation data continues to exceed expectations. Others argue that the market has already priced in the worst of the rate hike scenario and that a rebound could occur if economic indicators show signs of cooling.
Investors are now waiting for the next batch of economic data, including the Producer Price Index and retail sales figures, to gauge the trajectory of inflation and consumer spending. The outcome of these reports will likely influence whether the Federal Reserve proceeds with a rate hike at its next meeting or maintains its current stance.
The market’s reaction underscores the delicate balance between controlling inflation and supporting economic growth. As the week closes, the focus remains on whether the Federal Reserve can navigate these challenges without triggering a deeper downturn in equity markets.