Wall Street slumps amid interest rate, economic growth concerns

By Al Mayadeen English
Source: Agencies
26 Sep 2023 19:18

Investor frustration has been growing since last week's Federal Reserve meeting, during which the central bank hinted at the possibility of additional interest rate hikes in 2023.

A monitor displays information about the Federal Reserve interest rate on the floor at the New York Stock Exchange in New York, Wednesday, Sept. 20, 2023. (AP)

Wall Street on Tuesday experienced a decline in stock prices as traders remained concerned about the potential negative impact of elevated interest rates on economic growth, AFP reports.

Investor frustration has been growing since last week's Federal Reserve meeting, during which the central bank hinted at the possibility of additional interest rate hikes in 2023.

Other sources of concern include the looming possibility of a government shutdown and the ongoing United Auto Workers strike.

Approximately 15 minutes into the trading session, the Dow Jones Industrial Average had fallen by 1.4 percent to 33,869.66 points.

The broader S&P 500 index saw a 0.6 percent drop to 4,312.60 points, while the technology-heavy Nasdaq Composite Index also declined by 0.6 percent to 13,189.80 points.

"The ingredients are in place for another big leg down on Wall Street," Adam Sarhan of 50 Park Investments told AFP as he referred to a downward trend.

"That's why we're seeing pressure show up in the market and the bulls are scratching their head, asking collectively, where's the good news going to come from? What's the next bullish catalyst?"

It's worth noting that major stock indices managed to close higher on Monday, ending a four-day losing streak.

The news comes amid the looming threat of a government shutdown, driven by demands for significant spending cuts by hardline Republicans in the House of Representatives, just four months after narrowly avoiding a credit default.

With less than a week remaining, the proposed measures have yet to gain approval in the Republican-controlled House and face slim chances in the Democratic-controlled Senate.

Moody's warned on Monday that "a shutdown would be credit negative for the US sovereign" and that it "would underscore the weakness of US institutional and governance strength relative to other AAA-rated sovereigns."

The Biden administration warned a week ago that the consequences of a government shutdown would be far-reaching, with risks including the depletion of the Federal Emergency Management Agency's disaster relief fund, disruptions to scientific research, delays in FDA food inspections, interruptions to hundreds of thousands of federal workers' salaries, and potential impacts on health programs.