Stocks suffered their longest losing streak of the year, as geopolitical turmoil rattled Wall Street and investors slashed their bets on the Federal Reserve cutting interest rates anytime soon.
The S&P 500 fell 0.9% Friday, its sixth consecutive decline, marking its worst run since October 2022.
The slide dragged the S&P 500 down by just over 3% for the week, a third straight weekly decline. By that measure, it is the longest weekly losing streak for the index since September, when concerns over rising government debt and a potential government shutdown compounded worries about the effects of high interest rates.
Those fears dissipated toward the end of last year as inflation cooled and investors began to bet that the Fed would soon cut rates, prompting a ferocious stock rally in the first three months of 2024. But this month, worries that stubborn inflation would lead the Fed to keep rates high have returned.
“It’s clearly bleak,” said Andrew Brenner, head of international fixed income at National Alliance Securities.
Investors have pulled roughly $21 billion out of funds that invest in U.S. stocks over the two weeks through Wednesday, according to data from EPFR Global. That compares with an inflow of around $80 billion for the year through early April. And the unease is apparent not only in the stock market.
U.S. government bond yields, which underpin interest rates for a wide variety of loans, have been rising. The average rate on 30-year mortgages, the most popular home loan in the United States, rose above 7% Thursday for the first time this year.
The dollar is also markedly higher, putting pressure on countries that import goods from the United States and issue dollar-denominated debt. And oil prices, stoked by geopolitical tensions, are up more than 13% since the start of the year.
“There is nothing that looks good right now,” Brenner said.
Recent reports showing hotter-than-expected inflation have altered investors’ forecasts for the Fed, which has kept its key rate near a two-decade high.
Traders in futures markets, which allow investors to bet on where interest rates are headed, are wagering on one, and perhaps two, quarter-point cuts by the end of the year. At the start of the year, traders were expecting six cuts over that period.
c.2024 The New York Times Company. This article originally appeared in The New York Times.
