Stocks fall further as bank earnings add to concerns about the economy.

Stocks tumbled Thursday as investors grappled with the possibility of another higher-than-expected interest rate increase by the Federal Reserve and some downbeat earnings reports from major banks.By midday, the S&P 500 had fallen about 1.5 percent, adding to a string of recent losses that left the index down 2.5 percent for the week through Wednesday.Reflecting unease about the global economy, copper and oil prices were also lower. The European Commission on Thursday cut its forecast for growth, citing fallout from the war in Ukraine. Later Thursday, China is expected to report that its growth in the second quarter slowed substantially as parts of the country were locked down in an effort to contain the spread of the coronavirus.Government bonds also continued to send a dour economic signal: The yield on U.S. 10-year Treasury notes rose to 2.99 percent on Thursday, but was still below the yield on two-year notes. It’s an unusual occurrence, called an inverted yield curve, and is considered a signal that bond traders are anticipating a recession.Companies in the United States are starting to report their earnings for the three months through June, a chance for investors to assess how hard businesses are being hit by economic headwinds including inflation and slowing growth.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. Amid persistently high inflation, rising consumer prices and declining spending, the American economy is showing clear signs of slowing down, fueling concerns about a potential recession. Here are other eight measures signaling trouble ahead:Consumer confidence. In June, the University of Michigan’s survey of consumer sentiment hit its lowest level in its 70-year history, with nearly half of respondents saying inflation is eroding their standard of living.The housing market. Demand for real estate has decreased, and construction of new homes is slowing. These trends could continue as interest rates rise, and real estate companies, including Compass and Redfin, have laid off employees in anticipation of a downturn in the housing market.Copper. A commodity seen by analysts as a measure of sentiment about the global economy — because of its widespread use in buildings, cars and other products — copper is down more than 20 percent since January, hitting a 17-month low on July 1.Oil. Crude prices are up this year, in part because of supply constraints resulting from Russia’s invasion of Ukraine, but they have recently started to waver as investors worry about growth.The bond market. Long-term interest rates in government bonds have fallen below short-term rates, an unusual occurrence that traders call a yield-curve inversion. It suggests that bond investors are expecting an economic slowdown.On that front, shares of big banks were sharply lower after J.P. Morgan Chase reported a 28 percent decline in profit from a year ago, in part as it set aside new reserves for potential losses on its loans in its consumer business. Its Wall Street rival Morgan Stanley also said its profit fell by nearly a third from a year ago.“We are dealing with two conflicting factors, operating on different timetables,” Jamie Dimon, J.P. Morgan Chase’s chief executive said in a news release Thursday. “The uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices, are very likely to have negative consequences on the global economy sometime down the road.”Shares of JPMorgan fell about 4 percent, while Morgan Stanley tumbled about 1.3 percent. An index of bank stocks, the KBW Nasdaq Bank Index, fell more than 2 percent.Thursday’s selling follows a slump on Wednesday after the release of the latest report on consumer prices in the United States. The Consumer Price Index showed inflation in June was higher than anticipated, raising expectations for an even larger interest rate increase from the Fed later this month.Central bankers have asserted that cooling inflation is their top economic priority, but investors are concerned that the measures taken to tame inflation will push the economy into a recession. Analysts have emphasized that investors need to know that inflation has peaked before the markets can recover.Understand Inflation and How It Impacts You“There is nothing standing between the Fed and being more aggressive,” said Victoria Greene, chief investment officer at G Squared Private Wealth.In the futures market, traders are betting that the central bank will raise rates by as much as 1 percent at their July meeting. A week ago the probability of such a large jump in rates at a single meeting was zero.On Thursday, Christopher Waller, a Federal Reserve governor, said that he supported increasing the central bank’s policy interest rate in July by three quarters of a percentage point, matching an increase from June, though he suggested that an even larger move could be justified if economic data warranted it.
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