Fear swept through financial markets Thursday, and Wall Street tumbled as worries roared back to the fore that the world’s fragile economy may buckle under higher interest rates.
The S&P 500 fell 3.3% in a widespread wipeout to more than reverse its blip of a 1.5% rally from a day before. Analysts had warned of more big swings given deep uncertainties about whether the Federal Reserve and other central banks can tiptoe the narrow path of hiking interest rates enough to get inflation under control but not so much that they cause a recession.
Switzerland’s central bank, meanwhile, raised rates for the first time in years, a half-point hike. Taiwan’s central bank raised its key rate by an eighth of a point. Japan’s central bank began a two-day meeting, though it’s held out on raising rates and making other economy-slowing moves that investors call “hawkish.”
The worries dragged the S&P 500 into a bear market earlier this week, meaning it had dropped more than 20% from its peak. It’s now 23.6% below its record set early this year and back to where it was in late 2020. That effectively erases 2021, which was one of the best years for Wall Street since the turn of the millennium.
The U.S. economy is still holding up, driven in particular by a strong jobs market. Fewer workers filed for unemployment benefits last week than a week before, a report showed on Thursday. But more signs of trouble have been emerging. Treasury yields swung sharply on Thursday, with the 10-year yield down to 3.23% from 3.39% late Wednesday. It had climbed as high as 3.48% in the morning, near its highest level since 2011.
Cruise operators Norwegian Cruise Line Holdings, Royal Caribbean Group and Carnival all lost more than 11%.
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