The stocks closed mixed on Friday, as the stock market saw its worst week since the spring of 2020, when the world began to shut down due to COVID-19 lockdowns.
According to a report by The Hill, The S&P 500 gained 0.2 percent on the day on Friday but was down almost 4.3 percent for the week.
The Nasdaq composite increased 1.4 percent to conclude the week with a 1.7 percent loss, while the Dow Jones Industrial Average dropped 38 points to complete the week with a 4% loss. The Dow also fell below 30,000 points for the first time since late 2020 on Thursday.
Stocks swung back and forth all week in anticipation of and reaction to the Federal Reserve’s first interest rate hike since 1994, which was 0.75 of a percentage point.
The market dropped sharply on Monday and Tuesday amid concerns that the Fed would abandon its announced plan to raise rates by 0.5 percentage points, before rebounding on Wednesday following the Fed’s greater rate cut. However, equities fell again on Thursday before leveling down for a three-day weekend, with the market closed on Monday in honor of Juneteenth.
When the Federal Reserve raises interest rates, stock prices tend to fall. Consumers and corporations tend to spend less money and invest less in riskier assets like stocks and other securities as borrowing prices rise throughout the economy. As a result of slower sales and higher interest rates on their own loans, business profit margins tend to decrease.
All three main stock indexes have already lost more than 20% of their value from late last year’s record highs, triggering the formal definition of a “bear market.”