NEW YORK (AP) — U.S. stocks are plummeting Friday after sniffing out the worst-case scenario for financial markets: a combination of a weak economy and high inflation.
The S&P 500 fell 1.6% following the report. U.S. employers cut more jobs last month surpassed the value they created, after oil prices soared to their highest in nearly two years. iran war. It’s a combination that investors hate because no one in the world has better tools to deal with economic downturn and high inflation at the same time.
As of 10:10 a.m. ET, the Dow Jones Industrial Average was down 823 points, or 1.7%, and the Nasdaq Composite Index was down 1.4%.
“You can’t gloss over this report,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management. “Negative payrolls and a sharp rise in oil prices will have traders concerned about the risk of stagflation.”
Stagflation, what economists call a combination of economic stagnation and high inflation, made the situation worse after another report released on Friday showed that: U.S. retailer profits fall Last month’s sales exceeded economists’ expectations. This raises the disconcerting possibility that spending by U.S. households, the main engine of the economy, could grow close to the ceiling.
Typically, when the economy becomes unstable and the job market weakens, the Federal Reserve lowers interest rates to cheer things up. Lower interest rates could make it easier for households to take out mortgages, help businesses raise money to build factories, and support the prices of stocks and other investments. The Fed cut its key interest rate several times last year and has signaled it will cut additional rates further this year.
However, lower interest rates could also worsen inflation. And the Fed’s hands could become increasingly tied as soaring oil prices push up inflation due to war-induced disruptions to the energy industry.
The price of a barrel of international standard Brent crude rose a further 6.9% to $91.35, the highest since April 2024. A barrel of benchmark U.S. crude oil rose 9.2% to $88.45.
Oil prices have soared, with Brent rising from nearly $70 late last week as the war expands to include areas critical to energy production and movement in the Middle East. A lot depends on what happens Strait of Hormuz. Typically, about one-fifth of the world’s oil sails through the narrow waterway off the coast of Iran.
Some analysts and investors say that if oil prices rise further and reach around $100 per barrel, the global economy could become unsustainable.
To be sure, the U.S. stock market has a history of recovering relatively quickly after conflicts in places like the Middle East, as long as oil prices don’t rise too high for too long. Due to uncertainty about what will happen, enthusiastic swing across financial market This week, sometimes every hour.
For example, on Thursday Dow falls more than 1,100 points On Monday, the S&P 500 erased its 1.2% loss and ended with a slight gain.
President Donald Trump’s recent signals for war have clearly ruled out negotiations, wanting Iran’s “unconditional surrender.”
In the bond market, U.S. Treasury yields rose further as inflationary pressures increased due to soaring oil prices. More traders are betting that the Fed will cut interest rates at least once this year instead of twice, according to data from CME Group.
The yield on the 10-year U.S. Treasury rose to 4.17% from 4.13% late Thursday, up from just 3.97% before the war with Iran began.
Many small and medium-sized businesses need borrowing to grow, so they feel the high cost of borrowing even more strongly. Smaller companies are more likely to rely on the strength of the U.S. economy than their larger multinational rivals, and Wall Street’s smallest stocks fell the sharpest on Friday.
The small-cap Russell 2000 index, the market leader, fell 2.2%.
Wall Street’s biggest stocks were nearly wiped out. More than 90% of stocks in the S&P 500 index fell.
Companies with high fuel costs took the lead. Old Dominion Freight Line fell 7%, Norwegian Cruise Line Holdings fell 6.1% and Southwest Airlines fell 5.7%.
In overseas stock markets, indexes in the European market also fell after the Asian market performed well. France’s CAC40 fell 1.3% and Germany’s DAX fell 1.5%, while Hong Kong’s Hang Seng rose 1.7% and Japan’s Nikkei 225 rose 0.6%.
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AP Business Writers Chan Ho-him and Matt Ott contributed.
