US stocks head for worst week since bottoming in June

By Al Mayadeen English
Source: Agencies
23 Sep 2022 22:54

The Nasdaq Composite Index, which includes technology titans such as Amazon, Apple, Netflix, and Google, fell 5.8% in a week.

Major indexes in the US stock market. (Archive)

US stocks are capping for their worst weekly loss since June, as global equity markets sank under the weight of recession fears following interest rate hikes by central banks ranging from the Federal Reserve to the Bank of England this week in a desperate bid to combat inflation.

The Dow Jones Industrial Average, which includes stocks from 30 major US corporations, was down 4.5% on the week as of Friday's close. The S&P 500 Index, which represents the top 500 US stocks, fell 5.2% in a week. The Nasdaq Composite Index, which includes technology titans such as Amazon, Apple, Netflix, and Google, fell 5.8% in a week.

Federal Reserve could overdo interest rate hikes

The Vice Chair of the Federal Reserve, Lael Brainard, has lately admitted the possibility that the US Federal Reserve could cross a threshold in its continuous interest rate hike, a remark that was conspicuously absent from Chair Jerome Powell's address at Jackson Hole, Wyoming, in late August.

Brainard said in a speech delivered in front of a banking group, on September 8, in New York that "At some point in the tightening cycle, the risks will become more two-sided," adding that the velocity with which interest rates rise and the uncertainty surrounding the timing of their economic consequences "create risks associated with overtightening."

Furthermore, the Vice Chair warned that history showed that "it is important to avoid the risk of pulling back too soon," noting that when it comes to inflation, "our resolve is firm, our goals are clear, and our tools are up to the task."

While both Brainard and Powell appear to be completely on board with the Fed's drive to rapidly raise interest rates to combat inflation, Brainard was more inclined than Powell to accept that there are significant dangers to both increasing rates too high as well as risks not raising them high enough.