Stocks Sliding Again Thursday

NEW YORK (AP) -- Stock prices are falling further on Wall Street Thursday, a day after another big plunge rocked markets around the world.

The benchmark S&P 500 index fell about 1.5 percent. It has slumped almost 7 percent in the last six days and is now nearly 16 percent below the peak it reached in late September.

After steady gains through the spring and summer, stocks have slumped in the fall as investors worry that global economic growth is cooling off and that the U.S. could slip into a recession in the next few years. Oil prices fell sharply again.

Markets are also concerned about twin threats that could make the situation even worse: the ongoing trade dispute between the U.S. and China, which has lasted most of this year and shows few signs of easing, and rising interest rates, which act as a brake on economic growth by making it more expensive for businesses and individuals to borrow money.

The selling in the last two days came after the Federal Reserve raised interest rates for the fourth time this year and signaled it was likely to continue raising rates next year, although at a slower rate than it previously forecast.

Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said that Fed Chairman Jerome Powell didn't appear concerned about the state of the U.S. economy, despite deepening worries among investors that growth could slow even more. Wren said investors want to know that the Fed is keeping a close eye on the situation.

"He may be a little overconfident," said Wren. "The Fed needs to be paying attention to what's going on."

Powell also acknowledged that the Fed's decisions are getting trickier because they need to be based on the most up-to-date figures on jobs, inflation, and economic growth. For the last three years the Fed has been able to tell investors weeks in advance that it was almost certain to increase rates. But things are less certain now, and the market hates uncertainty.

Investors are responding to a weakening outlook for the U.S. economy by selling stocks and buying ultra-safe U.S. government bonds. The bond-buying has the effect of sending long-term bond yields lower, which reduces interest rates on mortgages and other kinds of long-term loans. That's generally good for the economy.

At the same time, the reduced bond yields can send a negative signal on the economy. The bond market has correctly predicted several previous U.S. recessions by buying long-term bonds and sending yields down.

At 12:45 p.m. Eastern time, the S&P 500 index was down 34 points, or 1.4 percent, to 2,472.

The Dow Jones Industrial Average fell 373 points, or 1.6 percent, to 22,949. The Nasdaq composite shed 113 points, or 1.7 percent, to 6,523.

The Russell 2000 index of smaller companies dropped another 21 points, or 1.6 percent, to 1,327.

Smaller company stocks have been crushed during the recent market slump because slower growth in the U.S. will have an outsize effect on their profits. Relative to their size, they also tend to carry more debt than larger companies, which could be a problem in a slower economy with higher interest rates.

The Russell 2000 is down almost 24 percent from the peak it reached in late August and it's down 13 percent for the year to date. That's almost twice the loss of the S&P 500 index, which tracks large companies.

The possibility of a partial shutdown of the federal government also loomed over the market on Thursday, as funding for the government runs out at midnight Friday. In general, shutdowns don't affect the U.S. economy or the market much unless they stretch out for several weeks, which would delay paychecks for federal employees.

Oil prices continued to retreat. They've dropped more than 40 percent since early October as the slowing global economy and rising production have knocked prices down.

Benchmark U.S. crude fell 4.1 percent to $46.21 a barrel in New York. Brent crude, used to price international oils, slipped 3.5 percent to $55.21 a barrel in London.

Bond prices were mixed. The yield on the two-year Treasury note rose to 2.67 percent from 2.65 percent, while the yield on the 10-year note stayed at 2.77 percent.

The gap between those two yields has been shrinking this year. When the 10-year yield falls below the two-year yield, investors call it an "inverted yield curve." That is often interpreted as a sign a recession is coming, although it's not a perfect signal, and when recessions do follow inversions in the yield curve, it can take a year or more.

"The bond market has been telling us something for about a year, and that is there's not going to be much inflation and there's not going to be a sustained surge in economic growth," said Wren, of Wells Fargo.

In France, the CAC 40 lost 1.8 percent and Germany's DAX fell 1.4 percent. The British FTSE 100 slipped 0.8 percent. Indexes in Italy, Portugal and Spain took bigger losses.

Tokyo's Nikkei 225 lost 2.8 percent and Hong Kong's Hang Seng gave up 1 percent. Seoul's Kospi shed 0.9 percent.

As investors adjusted to the prospect of a weaker economy and lower long-term interest rates, the dollar fell to 111.09 yen from 112.36 yen. The euro rose to $1.1459 from $1.1368. The British pound rose to $1.2675 from $1.2621. That sent the price of gold higher, and it gained 0.7 percent to $1,265 an ounce.

(BE)