Wall Street fell sharply on Friday after a solid jobs report for September increased the likelihood the Federal Reserve will barrel ahead with an interest rate hiking campaign many investors fear will push the U.S. economy into a recession.
"Rates have gotten too extreme," said Jim Paulsen, chief investment strategist at the Leuthold Group in Minneapolis. "They are risking doing some harm they don't really need to do, in my opinion. But they're under pressure, and they see it differently."
The Fed should not take comfort in the historically tight labor market because when the unemployment rate begins to rise, a leading indicator of a recession, it does so quickly, said Joseph LaVorgna, chief U.S. economist at SMBC Nikko Securities. "We haven't felt the full effects of the tightening," he said. "They're going to keep going until eventually this thing turns over, and when it turns over you won't be able to slow the momentum."
Despite a hefty two-day rally earlier in the week, Friday's nosedive put the S&P 500 on track for its fourth straight weekly decline, while the Dow and the Nasdaq were poised for their seventh consecutive weekly declines.
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