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Wall Street Tumbles on Fears for Economy as More Rates Rise – Voice of America – VOA News

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Fear swept through financial markets Thursday, and Wall Street tumbled as worries roared back to the fore that the world’s fragile economy may buckle under higher interest rates.

The S&P 500 fell 3.3% in a widespread wipeout to more than reverse its blip of a 1.5% rally from a day before. Analysts had warned of more big swings given deep uncertainties about whether the Federal Reserve and other central banks can tiptoe the narrow path of hiking interest rates enough to get inflation under control but not so much that they cause a recession.

The Dow Jones Industrial Average lost 2.4% and was briefly down more than 900 points, while the Nasdaq composite sank 4.1%. It was the sixth loss for the S&P 500 in its last seven tries, and all but 3% of the stocks in the index dropped.

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Wall Street fell with stocks across Europe after central banks there followed up on the Federal Reserve’s big interest-rate hike on Wednesday. The Bank of England raised its key rate for the fifth time since December, though it opted for a more modest increase of 0.25 percentage points than the 0.75-point hammer brought by the Fed.

Switzerland’s central bank, meanwhile, raised rates for the first time in years, a half-point hike. Taiwan’s central bank raised its key rate by an eighth of a point. Japan’s central bank began a two-day meeting, though it has held out on raising rates and making other economy-slowing moves that investors call “hawkish.”

A trader works on the floor at the New York Stock Exchange in New York, June 16, 2022.


A trader works on the floor at the New York Stock Exchange in New York, June 16, 2022.

Such moves and expectations for plenty more have sent investments tumbling this year, from bonds to bitcoin. Higher interest rates slow the economy by design, in hopes of stamping out inflation. But they’re a blunt tool that can choke off the economy if used too aggressively.

“Another concern is that with the change in policy, there’s been weakening economic data already,” said Bill Northey, senior investment director at U.S. Bank Wealth Management. “That raises the odds of a recession in the latter part of 2022 into 2023.”

The worries dragged the S&P 500 into a bear market earlier this week, meaning it had dropped more than 20% from its peak. It’s now 23.6% below its record set early this year and back to where it was in late 2020. That effectively erases 2021, which was one of the best years for Wall Street since the turn of the millennium.

The S&P 500 fell 123.22 points to 3,666.77. The Dow lost 741.46 to 29,927.07, and the Nasdaq dropped 453.06 to 10,646.10. Thursday’s biggest losses hit the stocks of the smallest companies, a signal of pessimism about the economy’s strength. The Russell 2000 index of smaller stocks sank 81.30, or 4.7%, to 1,649.84.

Not only is the Federal Reserve hiking short-term rates, it also this month began allowing some of the trillions of dollars of bonds it purchased through the pandemic to roll off its balance sheet. That should put upward pressure on longer-term interest rates. It’s another way central banks have been ripping away supports they earlier propped underneath markets to juice the economy.

The U.S. economy is still holding up, driven in particular by a strong jobs market. Fewer workers filed for unemployment benefits last week than a week before, a report showed on Thursday. But more signs of trouble have been emerging.

On Thursday, one report showed homebuilders broke ground on fewer homes last month. Rising mortgage rates resulting directly from the Fed’s moves are digging into the industry. A separate reading on manufacturing in the mid-Atlantic region also unexpectedly fell.

“Corporate earnings estimates have not yet changed to reflect some of the softening economic data and that could lead to the second leg of this repricing,” Northey said.

Treasury yields swung sharply on Thursday, with the 10-year yield down to 3.23% from 3.39% late Wednesday. It had climbed as high as 3.48% in the morning, near its highest level since 2011.

Higher rates have been delivering the hardest hits this year to the investments that soared the most through the easy, ultralow rates of earlier in the pandemic, which now look to be among the most expensive and risky investments. That includes bitcoin and high-growth technology stocks.

Big Tech stocks were among the heaviest weights on the market Thursday, but the sharpest losses hit stocks whose profits depend more on the strength of the economy and whether customers can keep up their purchases amid the highest inflation in decades.

Cruise operators Norwegian Cruise Line Holdings, Royal Caribbean Group and Carnival all lost more than 11%.

It’s all a sharp turnaround from a day earlier, when stocks rallied immediately after the Fed’s biggest hike to rates since 1994. Analysts said investors seemed to latch onto a comment from Fed Chair Jerome Powell, who said mega-hikes of three-quarters of a percentage point would not be common.

Powell said Wednesday the Fed is moving “expeditiously” to get rates closer to normal levels after last week’s stunning report that showed inflation at the consumer level unexpectedly accelerated last month, which dashed hopes that inflation may have already peaked.

The Fed is “not trying to induce a recession now, let’s be clear about that,” Powell said. He called Wednesday’s big increase “front-end loading.”

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Buttigieg defends 'extraordinary' economy as polling suggests significant discontent – ABC News

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Buttigieg defends ‘extraordinary’ economy as polling suggests significant discontent  ABC News

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Kashmir is bleeding. So is its economy

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On January 1, 2023, as the world celebrated the start of a new year, several families were mourning in the Rajouri district of Indian-administered Jammu and Kashmir. Armed men stormed a village and killed four civilians, injuring six others. Two more civilians were killed the following day.

Just a few weeks earlier, on December 13, India’s Minister of State for Home Affairs Nityanand Rai had presented investment data for Jammu and Kashmir. The numbers spoke for themselves: investments have fallen by 55 percent over the past four years.

Together, the killings and the declining investments contradict two central arguments that have been at the heart of the Indian government’s rationale for the 2019 abrogation of the semi-autonomous status that the region previously enjoyed: that the move would help improve security and spur economic development.

In the past, federal governments in New Delhi have often blamed Jammu and Kashmir’s woes on local governments in power in the region. That’s no longer an excuse that works.

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When the Hindu nationalist government of Prime Minister Narendra Modi eliminated Article 370 of the Indian constitution — which gave Kashmir “special status” — it also carved out the territory of Ladakh from the region. Kashmir’s statehood was withdrawn, and it was made a union territory, directly controlled by New Delhi.

Jammu and Kashmir doesn’t even have the disempowered legislature that other union territories have — the region hasn’t had elections in seven years. Yet it should now increasingly be clear, if it wasn’t previously, that sidelining democratic processes and principles, and steamrolling constitutional provisions, aren’t working in improving the region’s security or economic allure.

Follow the money

The abrogation of Article 370 allowed non-residents to buy and own land in Jammu and Kashmir for the first time. Critics of the region’s previous special status frequently cited restrictions on land ownership as a major reason why private sector industries were reluctant to set up businesses there.

However, data published by the Indian government’s Ministry of Home Affairs — and made public by Rai — calls a bluff on those claims. Total investment in 2021-22 in Jammu and Kashmir stood at $46m, down from $50.5m the previous year, and dramatically less than the $102.8m spent in 2017-18.

While the COVID-19 pandemic no doubt affected Kashmir’s economy, the statistics suggest that wasn’t the biggest factor in investments drying up. After all, the steepest fall in investments came the year that the Indian government ended Kashmir’s semi-autonomous status, before the pandemic, halving from $72.3m in 2018-19 to $36.3m in 2019-20.

Track the bullets

Things aren’t much better on the security front. Although political protests have subsided because most pro-independence leaders have been imprisoned, armed groups appear to have changed their tactics.

Attacks on civilians have increased in the last few years and are increasingly being directed at non-resident Hindus and the minority Kashmiri Pandit community. A S Dulat, the former chief of the Research and Analysis Wing, India’s external intelligence agency, recently highlighted the sophistication of these attacks. The targeted killings, he said, demonstrated that the armed groups have a strong intelligence network and possibly have members within the government.

At least 18 Kashmiri Pandits and non-resident Hindus have been killed in Kashmir since the abrogation of Article 370.

As with the economy, the Indian government’s own data does not support claims that armed groups have been contained. The number of attacks by such groups was 229 in 2021, not significantly different from many previous years: There were 279 incidents in 2017, 322 in 2016, 208 in 2015, 222 in 2014 and 170 in 2013, the year before Modi came to power.

What’s really at play

The Indian government had claimed that Article 370 restricted people’s participation in the political process and led to a few families dominating the politics of the region. However, since 2019, Modi’s Bharatiya Janata Party has taken steps to further disempower local Kashmiris.

First, constituency boundaries for the region’s legislature were redrawn in a way that gives Hindu-majority Jammu a greater say in elections than its population, relative to Muslim-majority Kashmir’s, merits. In effect, that strengthens the chances of the BJP coming to power in Jammu and Kashmir.

Then a revision of the voter list was carried out, giving voting rights to outsiders. Jammu and Kashmir is home to hundreds of thousands of migrant workers and army personnel — if allowed to vote, their electoral influence is going to be significant.

Some Kashmiri leaders have invoked the region’s 1987 elections which were allegedly rigged and were considered a tipping point when the armed separatist movement in Kashmir took off.

Meanwhile, armed groups may continue to adopt attacks on non-local civilians as the mainstay of their strategy to signal their opposition to demographic changes attempted by New Delhi.

While Kashmiris and non-locals alike suffer, there is no reason to expect that Modi and his government will change their policy towards the region. The BJP’s hardline approach towards Kashmir helps it bolster its image in the rest of India as a party that is tough on “terrorism” and “separatism”.

The truth, of course, is more complicated. The BJP’s policies have led to increased insecurity for people living in the region — whether they’re Hindu or Muslim. And there has been no economic payoff, either.

 

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5 Graphs Explaining Russia’s Wartime Economy – The Moscow Times

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5 Graphs Explaining Russia’s Wartime Economy  The Moscow Times

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