(NewsNation) — Global shares continued to decline Monday after the chairman of the U.S. Federal Reserve indicated last week that high interest rates will continue for some time to curb inflation.
The fall in Asian and European markets followed a drop on Wall Street, where the Dow Jones Industrial Average ended the week down more than 1,000 points. The Nasdaq is down nearly 500 points, and the S&P 500 is down 141 points.
But after initially plunging around 300 points Monday morning, the Dow recovered after lunch time and ended the day down 184.41 points. The Nasdaq ended the day at 12017.67 — a full percentage point below its Friday close. The S&P 500 ended the day falling 27.05 points.
NewsNation’s business contributor Lydia Moynihan joined “Rush Hour” on Monday to give context.
She says while Monday’s market closing wasn’t the the “bloodbath” we saw Friday, investors cannot ignore what happened on Wall Street even now.
“For anyone who has a pention fund, a 401(k), any kind of retial investment account — like Robinhood or e-Trade — you’re going to see that dip down pretty precipitously the past few days,” Moynihan said.
“For the next few months, a lot of market experts expect to see volatility. A lot of time, at the end of the summer, people are on vacation, which means there’s actually substantially less volume in the market. So that means, the past few weeks, things can have a much more dramatic impact that they normally would,” she said.
The markets are in an uncertain space right now, as investors grapple with rising interest rates and the Federal Reserve tightens monetary policy.
Friday’s sharp sell-off followed Fed Chairman Jerome Powell’s latest remarks, who said he thinks the labor market will soften in the months to come, but insists “price stability” and bringing down inflation is the paramount problem to solve.
Speaking Friday, he said the Fed would raise rates as high as needed to restrict growth and keep them there “for some time” to bring down inflation running well above its 2% target.
Inflation is running at about 7%, a drop from 9% in June. It’s a promising sign, but Powell says it’s still not enough to stabilize the economy.
“It just creates a sort of ripple effectr across the economy that slows growth, as businesses are less inclined to take out a loan if it cost more money, as are individuals,” Moynihan said speaking on the economic impact of Powell’s speech.
“So we are kind of in a peroid of contraction. We’ve seen GDP decline the past couple of quarters,” Moynihan explained.
This comes as major retailers are dealing with a glut of goods they need to clear out.
A lot of items, especially summer items, have been on sale and will continue to go on sale.
While it is sort of a perk for consumers in this otherwise chaotic economic environment, retailers do expect to see a lot of sales taper off. Consumers are paring back spending on a lot of discretionary goods, including apparel and electronics. Instead, they’re focused on filling up their car with gasoline and buying groceries.
However, if consumers are in the market, especially for some sort of summer item, they can get that at a heavily discounted price the next few weeks.
More news from the Fed is to be expected this week that might sharpen the economic outlook, as the vice chair speaks Tuesday.
August’s non-farm payrolls report is also expected Friday.
As for Bitcoin, BTC, dropped below $20k Monday for a second time — the first time since mid-July. Additioanlly, Ether got down to around $1,400, its lowest level in a month.
Alternative coins, including Litecoin, Doge and Algo, have all been shredded this year. Crypto in general is down more than 50% in 2022, with Bitcoin more than 70% off its all-time high price of nearly $69k last November.