US stocks lose ground as recession fears weigh on market

Stocks fell in morning trading on Wall Street Thursday as worries build that the US may be headed for a painful recession.

The Standard & Poor’s 500 fell 0.7% as of 10:16 am Eastern. The Dow Jones industrial average fell 209 points, or 0.6%, to 33,087 and the Nasdaq composite fell 0.9%.

Every major index is on track for a weekly loss after the market kicked off the year with a two-week rally.

Reports showed weakness in several areas of the economy, including the housing industry and manufacturing in the mid-Atlantic region, though they weren’t quite as bad as expected and the job market appears to remain healthy. They follow worse-than-expected readings a day earlier on retail sales, a cornerstone of the economy, and industrial production.

The latest economic data paints a picture of an economy slowing under the weight of last year’s blizzard of rate hikes by the Federal Reserve. The central bank aggressively raised interest rates to purposely slow the economy and cool inflation. The strategy risks hitting the brakes too hard on economic growth and causing a recession.

Several major banks are forecasting at least a mild recession this year as the impact from the Fed’s rate increases reverberates through the economy. Inflation has been cooling, but prices are still stubbornly high on many items and are squeezing consumers.

The central bank has raised its key overnight rate to a range of 4.25% to 4.50% from roughly zero a year ago. The Fed will announce its next decision on interest rates Feb. 1. Investors are largely forecasting a raise of just 0.25 percentage points next month, down from December’s half-point hike and from four prior increases of 0.75 percentage points.

The Fed has maintained that it won’t ease off its fight against inflation until it is sure that prices are cooling. It has also been closely watching several areas of the economy, including the labor market, to get a better sense of whether inflation is slowing. The latest weekly unemployment data shows that employment remains strong, which is good for workers but makes the Fed’s fight against inflation more difficult.

Wall Street is also closely reviewing the latest round of corporate earnings to get a clearer picture of how companies are dealing with inflation and a slowing economy. Credit card issuer Discover Financial fell 3.2% after it forecast an increase in net charge-offs in 2023. Adhesives company HB Fuller shed 2.8% after reporting weak financial results.

European markets fell and Asian markets ended mixed.

Yuri Kageyama and Matt Ott contributed to this report.

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