August 29, 2022
US stocks continue to decline for the second consecutive session since Jerome Powell’s comments regarding raising interest rates
US stocks closed lower Monday, amid concerns that the central bank will continue to raise interest rates once more.
Jerome Powell, Chairman of the Federal Reserve Board of Governors, said the rate hike will continue as part of efforts to control price inflation.
The Dow Jones and Standard & Poor’s 500 indices ended Monday’s trading at lower levels compared to the previous session.
The inflation rate in the United States reached the highest levels in nearly 40 years, while the American economy recorded a contraction for the second consecutive quarter in 2022.
What this data recorded is considered a recession in many countries of the world, but it was not classified as such in the United States, which uses additional data so that it can call this economic situation a “stagnation”.
The decline in the first trading session in the New York Stock Exchange this week came as an extension of the collapse in stock trading on Wall Street that began last Friday when Fed Governor Powell stressed, in his speech to the Jackson Hole Economic Forum, which was held last Friday, that the central bank will move “vigorously” from In order to control inflation, though, it might lead to “some pain” for American households and businesses.
The Fed governor said: “Restoring price stability will take some time and require that we use our tools aggressively to balance supply and demand and bring them to better levels.”
“While high interest rates, sluggish growth and deteriorating labor market conditions bring down inflation, these factors will cause some pain to households and businesses. This is the unfortunate cost of lowering inflation. But failure to restore it will cause even greater pain.”
The Dow Jones Industrial Average fell by regarding 0.57 percent, while the Standard & Poor’s 500 index fell by 0.67 percent, with the Nasdaq declining by regarding 1.02 percent.
This decline came following the three major indices on Wall Street fell by regarding 3.00 percent last Friday, while the Nasdaq Heavy Technology Industries recorded its worst daily performance since last June.
Shares of major technology companies, Apple, Microsoft and Tesla, fell between 1.07 percent and 1.37 percent at the close of trading on Monday.
There are concerns among investors in the financial markets regarding the possibility that slowing economic growth in light of high interest rates will lead the US economy into a recession.
“Investors are getting the idea that the Fed is serious regarding curbing inflation,” said Rudu von Lipsey, principal at UBS Private Wealth Management.
The Fed has continued to raise rates in the past few months in response to the sharp rise in rates. Higher interest rates mean higher borrowing costs for individuals and businesses, which would cause growth to slow just as much as lower inflation.
The Federal Reserve raised the interest rate by 0.75%, aiming for the main rate to reach 2.25 to 2.5 percent at the last July meeting, while the interest rate adopted by the Fed last March was regarding zero.
