Sad days are here again on Wall Street

Sad days are here again on Wall Street

Man looks at screens at New York Stock Exchange

Photo: Angela Weiss/AFP by way of Getty Images

After bursting out of the gates in early 2023, the market has misplaced its mojo this week.

Driving the information: Stocks slumped for a 3rd straight session Thursday, because the S&P declined by 0.8%. That put the S&P down 2.5% for the week, on observe for the primary down week of the yr.

Flashback: Every week in the past, the S&P was up 4.2% for the yr, elevating hopes of a snap-back from final yr’s 19% tumble.

  • After the previous couple of days, it is up simply 1.6% to this point this yr.

Between the strains: Here’s what’s taken the spring out of traders’ steps.

  • They had hoped that slowing inflation would make the Fed extra more likely to reduce rates of interest. But latest verbiage from Fed heads suggests they wish to maintain climbing till the Fed funds rate is above 5%.
  • Even as inflation knowledge — and another latest financial stories on industrial manufacturing and housing for instance — present elements of the financial system weakening, individuals are nonetheless a bit extra apprehensive about a recession.

Context: And if a deeper recession comes, the federal authorities could not do a lot spending to cushion the blow — not less than till the debt ceiling is raised.

  • The technique of elevating the debt ceiling appears to be like nearly sure to be a gnarly political brawl that would tank markets. (Remember, the S&P 500 fell 15% through the 2011 debt-ceiling brouhaha.)

  • And lastly, early fourth-quarter earnings outcomes have appeared a tad bit delicate.

Yes, however: None of that makes it a certainty that shares could have yet one more terrible yr. After having a few good weeks, we had a nasty week. That’s how markets are.

What we’re watching: Price knowledge, in fact. The subsequent large one to look at will likely be private consumption expenditures (PCE), the Fed’s most popular gauge of inflation and a part of personal income data due per week from Friday.