Global Markets Fall on Worries About Inflation and Interest Rates

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Markets around the world slid on Friday as investors continued to fret about inflation, recession and rapidly rising interest rates.

The S&P 500 fell 2 percent in afternoon trading, putting the index on track for a second consecutive weekly decline. It is also now negative for the quarter; if it persists through the end of the month, it would be the first time since 2008 that the index has had three straight quarters of losses.

The Dow Jones industrial average fell 1.8 percent, bringing it close to the edge of a bear market, defined as a 20 percent decline from a peak.

The moves indicated “a continuation of the worries we’ve had all week,” said Ryan Detrick, the chief market strategist at Carson Group, namely that “global central banks being led by the Fed are hiking rates sooner than we thought to combat inflation and likely leaving rates higher for longer.”

In a research note, analysts at Goldman Sachs sharply lowered their year-end forecast for the S&P 500 to a level that implies a modest fall from current prices, where the analysts expect it to remain through the first half of next year.

Inflation is more persistent than expected, the analysts wrote, and that led them to forecast that the Federal Reserve would raise rates higher than previously assumed, which is typically bad for stocks. But “the outlook is unusually murky,” they said.

The yield on the 10-year Treasury note, a benchmark for borrowing costs, rose slightly, extending an earlier increase after the Fed announced another supersize rate increase on Wednesday.

In Europe, the Stoxx 600 fell 2.3 percent, bringing it down just over 20 percent from its January high, confirming a bear market. Markets in Britain were particularly shaken by the details of new government policies on tax cuts and spending.

The Nikkei 225 in Japan closed with losses of about 0.6 percent, and in Hong Kong, the Hang Seng fell around 1.2 percent.

Reflecting worries about economic growth, the price of West Texas Intermediate crude oil, the U.S. benchmark, was down more than 5 percent, dropping below $80 a barrel for the first time since January. The dollar, often a haven for investors during times of turmoil, gained more than 1 percent against a basket of currencies of major U.S. trading partners.

Bitcoin, the largest cryptocurrency, fell 1 percent to around $18,800, near its lowest level of the year.

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