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Stocks inch up after sell-off pushes S&P 500 into bear market – The Washington Post

U.S. markets were poised for modest recovery Tuesday, a day after intensifying inflation fears spurred a dizzying sell-off that shoved the S&P 500 into bear market territory.

The Federal Reserve’s policy meeting today and Wednesday remains center stage, as the central bank is expected to again raise rates in an effort to tamp down surging prices. The Fed had long been expected to raise rates by half a percentage point, but a JPMorgan Chase research note issued Monday raised speculation the Fed could move even more aggressively and go with three-quarters of a percentage point, or more. The note suggested that a sense of urgency could be settling in at the central bank.

“Investors look as if they increasingly fear the central bank will become more aggressive with the pace of interest rates to try and curb inflation, given May’s cost of living figures were higher than expected,” Russ Mould, investment director at AJ Bell, said in commentary Tuesday. “A decision to raise rates by more than half a percentage point could cause chaos on the markets and put a bigger dent into investors’ portfolios than they’ve already seen this year.”

The S&P 500, which plunged 3.9 percent Monday to push into a bear market — defined as a 20 percent drop from a recent high — edged up 0.5 percent after opening bell Tuesday. The tech-heavy Nasdaq rebounded 0.7 percent after losing more than 4.7 percent the day before. The Dow Jones industrial average edged up 0.2 percent.

The three indexes come into Tuesday’s session with deep deficits on the year: The S&P 500 has slumped 21 percent in 2022 and the Dow 16 percent. The Nasdaq, deep into its own bear market, has shed nearly 31 percent.

Cboe’s volatility index, known as Wall Street’s “fear gauge,” is up 92 percent for the year according to MarketWatch.

“Fears of stagflation have hit the highest level since 2008, while global economic growth optimism has sunk to a record low,” Ivan Feinseth, chief investment officer at Tigress Financial Partners, said Tuesday in commentary.

What is stagflation? Here’s why it matters and what you should know.

Cryptocurrencies continued their precipitous plunge as investors flocked for safer ground, with bitcoin careening below $22,000. Back in November, it was trading above $65,000.

Coinbase, the biggest cryptocurrency trading platform, announced Tuesday that it would slash its workforce by 18 percent — at least 1,000 positions by current head counts — as it prepares for another possible recession and “crypto winter,” according to chief executive Brian Armstrong. The company’s shares slumped 7 percent in early trading.

Armstrong’s comments echo those of Jamie Dimon, Elon Musk and other executives that have been signaling caution about the state of the economy. More than 15,000 tech workers were laid off last month according to data from Layoffs.fyi, the highest since the early days of the pandemic.

2022 has already delivered a nonstop storm of uncertainty for investors and companies, from a vexed supply chain to labor shortages, soaring prices and the vast fallout from the war in Ukraine. Now, the outlook is only getting tougher, dragging down even big names that seemed Teflon throughout much of the pandemic: Amazon’s shares are down nearly 40 percent for the year; Tesla, 46 percent; Meta, 51 percent; and Peloton 72 percent.

In May, consumer prices shot up another 1 percent compared with April to a pandemic-era peak of 8.6 percent according to data from the Bureau of Labor Statistics, as soaring energy, housing and food prices drive up costs at the fastest pace in 40 years.

Wholesale prices are up 10.8 percent from a year ago, according to a fresh reading of the Producer Price Index on Tuesday, near a record annual pace as inflation puts pressure on every rung of the supply chain. Transportation and warehousing costs jumped 2.9 percent, suggesting supply chain pressures will continue to weigh on businesses and consumers.

Consumer spending is the primary engine of the U.S. economy, powering roughly 70 percent of the country’s gross domestic product. But evidence is mounting that households are being forced to cut back amid the surging prices; consumer sentiment plummeted 14 percent in May to a record low according to the University of Michigan’s consumer sentiment index.

The national average for gas surpassed $5.01 Tuesday, another fresh high according to data tracked by AAA. A year ago, the national average was $3.08.

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