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People on the trading floor at the New York Stock Exchange.
NYSE
The stock market is losing steam all of a sudden, probably because investors had just gotten too aggressive in their assumptions about a recovery in the economy and profits in 2024.
The market has been plain old weak in the past several trading sessions, without a particularly strong reason. The messages from Federal Reserve officials have been mixed, giving markets neither a reason to rise nor a clear trigger for a decline.
Fed Chair Jerome Powell said that the rate of inflation will keep falling, which indicates increases to interest rates meant to reduce demand for goods and services are almost over. The market liked that, but other Fed officials said that rates may need to go higher than investors think.
Yet the
S&P 500
came into Friday’s trading session down just over 2% from early February, the high point of a monthlong rally. It closed the week down 1.1%, taking a breather after scoring double-digit gains from its lows in early October.
The critical factor is that the recent rally was based on a focus too far into the future. Investors are reasoning that because the Fed is likely to stop raising rates, profits will recover in 2024 after weakening this year.
As the eight rate increases the Fed has rolled out over the past year cut into economic demand, analysts have lowered their forecasts for companies’ sales. Some companies are selling fewer goods and services, while others are finding it difficult to raise prices despite inflation.
That is even more problematic for profit margins. Analysts’ consensus call on…
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