Home Business Wall Street continues to fall after entering the bear market

Wall Street continues to fall after entering the bear market

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The yields of treasury treasuries have been rising and falling and approaching the highest level in more than a decade. They also have a relatively reliable warning sign of a recession in the bond market that turns on and off.

In the afternoon, the yield of the two-year treasury fell below the 10-year yield by 3.41 percent against 3.46 percent. This is usually the case in the bond market.

In unusual circumstances, when a two-year return exceeds a 10-year one, some investors see this as a sign that a recession may occur in about a year or two. This is called the “inverted yield curve” and it has periodically erupted and shut down over the last day.

Markets are looking forward to a decision on interest rate from Fed Jerome Powell on Thursday AEST.Credit:AP

On Wall Street, Oracle rose 9.5 percent after reporting higher revenue and earnings for the last quarter than analysts had expected. FedEx jumped 14.3% after increasing dividend payments by more than 50%.

It was the first trading in U.S. stocks after the S&P 500 closed Monday, 21.8 percent below a record set earlier this year. This has put it in a bear market, which investors call a drop of 20 percent or more.

At the heart of the sale is the US Federal Reserve’s efforts to control inflation by raising interest rates. The Fed is trying to take control of prices, and its main method is to raise rates, but it is a stupid tool that can slow the economy too much and cause a recession.

“True calm in today’s market is very much driven by the focus on the Fed’s decision this week.” said Greg Basuk, CEO of AXS Investments. “Today is either a lull before the storm, or a lull, which I hope will be a long lull.”

Other central banks around the world, including the Bank of England, are also raising rates, while the European Central Bank has said it will do so next month and in September.

The war in Ukraine is dramatically raising oil and food prices, fueling inflation and cutting consumer spending, especially in Europe. Meanwhile, COVID infections in China have led to some harsh restrictions that are slowing down businesses, threatening to hold back the world’s second-largest economy and worsen supply chains.

“The old equilibrium to the crown, with low inflation, ultra-free monetary policy and low geopolitical risk premiums, is no longer maintained,” said Andreas Koester, head of portfolio investment management at Union Investment in Frankfurt, Germany.

“We are now in the transition to a new equilibrium after the crown, in which only the outlines are visible, such as higher inflation or a return to competition from major powers in the international arena,” Koester added.

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The shift of central banks, especially the Fed, towards higher interest rates has changed the spectacular rise in stock prices caused by massive market support after the pandemic hit in early 2020.

Higher interest rates usually make investors less willing to pay high prices for risky investments. That’s why some of the biggest stars of the previous era of low rates have been among the hardest hit in this year’s defeat, including bitcoin and high-tech stocks. In 2022, Netflix dropped more than 70 percent.

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