Dow hits bear market as inventory selloff goes from dangerous to worse

Market Experiences Another “Shellacking” as Fears of a Recession Grow
As concerns over a full-blown recession intensify, equity markets took another beating over the week, and purchasers of inventory desired a strong stomach. The Dow Jones Industrial Common (DJIA) saw a brief dip into a bear market on Friday before barely recovering from a 700-point loss. Currently, the common is at its lowest point since November 2020. This is due to the S&P 500 and Nasdaq Composite closing the second week in a row lower and dropping to June lows.
After the Federal Reserve hiked interest rates by 75 basis points on Wednesday and the Federal Funds rate was revised to 4.4%, which is higher than initially anticipated, the Goldman Sachs team, under David Kostin, reduced their outlook for the S&P this year by 16% to 3,600 from a previous target of 4,300, citing the possibility of a sharp decline or “arduous touchdown” in the financial system.
“There is a wider range of possible outcomes and more volatility in the future pathways of inflation, financial advancement, interest rates, earnings, and valuations than usual. According to Kostin’s analysis note released on Friday, “most equity buyers have adopted the view that a difficult touchdown state of affairs is inevitable, primarily based on our shopper discussions. Their focus is on the timing, magnitude, and period of a possible recession and funding methods for that outlook.”
Chairman Jerome Powell suggested the financial system’s planned soft landing, or an even more gradual deceleration, could possibly be off the table the day before. That will rely on a number of factors, including how quickly wage and price inflation pressures abate, whether or not expectations remain stable, and whether or not we receive increased labour supply, which may also be helpful. Furthermore, the likelihood of a delicate touchdown is expected to decline to the point where coverage needs to be more restricted or more restrictive for a longer period of time,” he said during his news conference.
Last week, FedEx and UPS, who together account for around 12%–14% of the US GDP, reduced their financial estimates due to a $500 million revenue deficit. “International volumes decreased as macroeconomic conditions both globally and domestically deteriorated significantly later in the quarter. First quarter results fall short of our objectives, but we’re working quickly to overcome these challenges,” FedEx Company president and CEO Raj Subramaniam said in the financial announcement.
Fears that a recession may reduce demand also caused the oil market to unravel during the week, with U.S. crude dropping more than 7% to $78.74 per barrel.
Jerome Powell, the chair of the Federal Reserve, stated on Thursday that the recession driving job losses at FedEx and other corporations, together with a surge in global prices, are the main causes of economic uncertainty facing the U.S. central bank. While pointing out that the DJIA and the S&P 500 are still much above their pre-pandemic levels, he also issued a possible bear market warning.