Stocks are falling in the first trading on Wall Street on Tuesday after a five-week rally brought it to its highest level since the spring of last year.
The S&P 500 was down 0.9% in morning trading. The Dow Jones Industrial Average was down 374 points, or 1.1%, to 33,924, as of 10:30 a.m. ET, while the Nasdaq Composite was 0.9% lower.
The US stock market is taking a step back after many steps forward in the hope that the economy can avoid a recession and that inflation is declining enough for the Federal Reserve to stop raising interest rates soon. A frenzy around artificial intelligence has also led a select group of tech stocks to big gains.
Those hopes are battling concerns that sticky inflation will force the Fed to keep interest rates higher for longer, potentially weakening the economy. With some of the easier improvements in year-on-year inflation soon to be outpaced, a tougher road may lie ahead for both the economy and financial markets.
“In building on the lessons of the 1970s, the Fed is right to be cautious, even if that represents an inconvenient truth for stock investors,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.
During the 1970s, inflation stayed high for much longer than expected, forcing the Federal Reserve to finally push the economy into a recession by dramatically raising interest rates.
Meanwhile, in China, the world’s second-largest economy is faltering in its recovery after the easing of anti-COVID restrictions.
Shares in Hong Kong fell 1.5% on Tuesday after China’s central bank cut interest rates less than some investors expected. Shares in Shanghai fell 0.5% amid disappointment that Chinese authorities did not do more to support one of the world’s main engines of economic growth.
One of China’s biggest corporations, Alibaba Group, also fell after it shook up its top management and announced a new chief executive. Its share trading in the US fell 4.8%.
[Con información de The Associated Press]
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