Wall Street racked up more losses for stocks on Thursday as the market closed its worst quarter since the pandemic began in early 2020.
The S&P 500 fell 0.9%, its fourth consecutive decline. The benchmark is now down 21% since hitting an all-time high earlier this year. It entered a bear market earlier in June.
All told, the S&P 500’s performance in the first half of 2022 was the worst since the first six months of 1970.
“And in 1970 there was a strong rebound from that first half of decline,” said Lindsey Bell, chief market and currency strategist at Ally Invest. “This time around, the impact of the Fed, the impact of inflation and the uncertainty about where growth will go is really weighing on investors’ minds. … We just don’t know when the clouds of uncertainty will start to lift.
The market’s sharp decline this year all but erased its gains from 2021, which was a banner year for the market as it emerged from its previous bear market in early 2020.
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Rising inflation has been behind much of the broader market slump this year, as businesses raise prices for everything from food to clothing, and consumers are more and more pressured. Inflation remains stubbornly high, according to a series of recent economic updates.
The Federal Reserve and other central banks have aggressively raised interest rates in an attempt to slow economic growth in order to calm inflation. Higher rates can lower inflation, but they also risk a recession by slowing the economy too much. They also drive down the prices of stocks, bonds, cryptocurrencies, and other investments.
“What the market is trying to gauge is when does it look like the Fed will get what it needs to make sure inflation tops out,” said Quincy Krosby, chief equity strategist for LPL Financial.
The S&P 500 fell 33.45 points to 3,785.38 on Thursday. It lost 16.4% in the April-June quarter, its biggest quarterly decline since it fell 20% in the first three months of 2020, when the pandemic rocked the global economy in a few weeks.
The Dow Jones Industrial Average fell 253.88 points, or 0.8%, to 30,775.43. The Nasdaq slipped 149.16 points, or 1.3%, to 11,028.74.
Shares of smaller companies also fell. The Russell 2000 fell 11.38 points, or 0.7%, to 1,707.99.
The 10-year Treasury yield, which helps set mortgage rates, fell to 3.01% from 3.09% late Wednesday.
Technology companies were among the largest weights in the market as investors continued to favor utilities and other traditional defensive stocks. Apple fell 1.8%, while Exelon rose 2.2%.
Retailers and other businesses that rely directly on consumer spending also suffered some of the biggest losses, as they have all year. Amazon lost 2.5% and Best Buy lost 2.9%.
Investors received another inflation update on Thursday. A measure of inflation closely monitored by the Fed rose 6.3% in May from a year earlier, unchanged from its April level. The Commerce Department report also says consumer spending grew at a slow 0.2% from April to May.
The update follows a worrying report earlier this week showing consumer confidence slipping to its lowest level in 16 months. The government also reported that the US economy shrank 1.6% in the first quarter and weak consumer spending was a key driver of the contraction.
The situation has become even more complicated following additional supply chain issues due to COVID-19 lockdowns in China and Russia’s invasion of Ukraine. The war in Ukraine has caused oil prices to spike this year, leading to record gasoline prices.
The OPEC oil cartel and allied producing nations decided on Thursday to increase crude oil production, but the amount is unlikely to help relieve high gasoline prices at the pump and inflation fueled by the energy plaguing the global economy.
“There’s no doubt that these two quarters have been difficult for the market, the American economy, the American consumer and for the work of the Fed to control and reduce inflationary pressures,” Krosby said. “And yet, as we enter the start of the second half of the year, the companies have been successful so far and it’s the guidance they’re offering that will help set the tone over the next two weeks.”