As inventories fall, economic concerns increase along with inflation

But in April, Federal Reserve officials are starting to shift Their view, expressed in speeches and other public comments, about the speed with which interest rates must rise to control inflation, has shifted Wall Street’s economic outlook as well. In the futures market, where traders are betting on how high interest rates will be, the prevailing view now is that the Fed rate will rise to About 2 percent by July – Something that seemed unimaginable even a month ago.

For that to happen, the central bank would have to raise its policy rate by half a percentage point At each of its next three meetingsAnd he fears such sharp increases could trigger a recession, rather than just calm things down enough to slow inflation while keeping the economy growing.

“Every time the Fed has spoken, the markets have taken it somewhat negatively,” said Saira Malik, chief investment officer at Novin, a global investment manager. “Investors are concerned that with these multiple rate hikes, the Fed will cause a recession rather than a soft landing.”

Higher interest rates will affect consumer demand. Mortgage rates, for example, have already jumped to the top 5 percent of 3.2 percent at the start of the year, consuming new homebuyers’ budgets. Other borrowing costs, from consumer loans to corporate debt, will rise as the Federal Reserve raises the benchmark interest rate higher.

At the moment, many companies – from United Airlines to PepsiCo Pass on increased costs and report continued high sales.

Economists wonder how long this will last.

“There will be a natural slowdown in spending, perhaps before interest rates are raised, as costs increase,” said Jean Boivin, president of the BlackRock Investment Institute. “The central bank will need to monitor that very carefully because if it happens naturally and then you add interest rate increases, that is how you get into a recession scenario.”

Overall, earnings reports this week showed continued earnings growth. Data from FactSet shows that about 80 percent of companies in the S&P 500 reporting results through Thursday have done better than expected.

But other companies only added to the overdraft. Netflix It retreated after it said last week that it expects to lose subscribers — 200,000 in the first three months of the year, and another 2 million in the current quarter. The stock is down more than 46 percent in the month.

On Friday, Amazon fell 12 percent, a day after the e-commerce giant reported its first quarterly loss since 2015, citing rising fuel and labor costs and warning that sales will slow. Its shares are down 22 percent this month.

General Electric warned on Tuesday that the economic fallout from the Russian invasion of Ukraine would affect its outcome. Its shares are down 10 percent that day and are down about 16 percent in the month.