Stocks fell slightly on Wednesday as a growing number of major Wall Street firms warned that the likelihood of a recession has risen sharply, while Federal Reserve Chair Jerome Powell pledged that the central bank is “strongly committed” to raising rates until moderate inflation.
Markets finished lower in choppy trading: The Dow Jones Industrial Average fell 0.2%, less than 100 points, while the S&P 500 lost 0.1% and the tech-heavy Nasdaq Composite 0.2%.
The Dow was down by as much as 400 points but stocks pared back losses following comments from Fed Chair Powell, who said the central bank is “determined to take the measures necessary to restore price stability” and that “ongoing rate increases will be appropriate. ”
Citigroup became the latest Wall Street bank to increase its recession odds, meanwhile, forecasting a 50% chance of a downturn as consumer demand “looks to be softening.”
“The best case scenario is a ‘soft landing’ with a slight rise in the unemployment rate, but risks of a more significant downturn are rising,” Citi analysts wrote in a recent note.
Goldman Sachs on Tuesday put the odds of a recession at 30% in the next year and nearly 50% within the next two years, while also slashing GDP estimates by as much as 2% due to tighter monetary policy from the Federal Reserve.
Morgan Stanley strategists, meanwhile, raised their forecast to a 35% chance of a recession in the next year and predicted that the S&P 500 could plunge by another 20% as surging inflation remains “very stubborn.”