The Standard & Poor’s 500 Index is down about 3.6% on Friday, while the Dow Jones is down about 940 points, or 2.8%.
The most closely watched inflation reading released on Friday – the core PCE price index – rose 5.2% from a year ago, causing more trouble for the economy.
For the month, markets closed at record lows. The Nasdaq is down about 12% this month, the S&P 500 has lost more than 7% and the Dow is down about 4%.
There are a growing number of headwinds making investors unsure of what will happen next. This earnings season has been tepid, and US GDP fell 1.4%, well below analysts’ estimates of a 1% gain. The Federal Reserve has turned hawkish, indicating that it will increase the pace of interest rate hikes next week.
Globally, the conflict between Russia and Ukraine has exacerbated commodity price inflation and left companies uncertain about their outlook for the second quarter. China has seen declining growth and continues to upset global supply chains with a zero-Covid policy shutdown, and the deglobalization trend is hurting S&P multinationals.
The Nasdaq is now in bear market territory, about 23% below its high. The S&P 500 is more than 13% below its high and 10% below its record.
Bank of America analysts cut 100 points from their year-end target for the S&P 500 on Friday to 4,500. The average peak-to-trough decline in the S&P 500 amid recessionary periods is about 32%, they said, meaning the current decline is about 32%. at 10% YTD “can roughly be interpreted as a discount to one-third of the chance of a recession.”
The bank said that if the probability of a recession rises, sharp declines may continue.
Investors next week will be watching closely the Federal Reserve’s policy meeting, the April jobs report, and more corporate earnings from Starbucks, Uber, Lyft and Pfizer.