As the global stock markets are concerned about the growth slowdown, U.S. stocks fell on Friday trading in the stock market. Major indexes too fell to some extent as the Dow Jones Industrial Average saw a decline of triple digits and according to market observers it is the worst week since May of 2012.
A similar trend was followed by the S&P 500 which declined 38 points, or 2.1%. Following the trend in the down market, the tech-heavy NASDAQ saw the worst day of them all as it declined 91 points, or 2.2%. Earlier, the International Monetary Fund’s managing director warned about the risks posed to the global economic recovery due to stimulus tapering.
Nonetheless, an end to easy-money policies in the United States and Europe is also a major factor that is generating fear among investors. A clear indicator regarding this came on Friday’s trading when the Dow Jones industrial average saw a fall of 318 points. The day also saw the worst performance as the blue-chip index fell the most since last June.
The deteriorating performance of the Dow Jones can be guessed from the fact that it plunged almost 500 points over the two days. As the day was not going well, investors shunned risk and even small-company stocks fell.
IMF Head Warns of Slowdown in Global Growth Rate
Christine Lagarde, the head of IMF said that it is high time for policymakers around the world to pay attention to the potential repercussions from the Fed’s tapering. Earlier the U.S. Federal Reserve decided that it will reduce monetary stimulus which could have a severe impact on the global economy.
It is believed that falling prices can hurt an economy. Market analysts believe that as consumers postpone spending in the hope of getting cheaper deals in the future while businesses fail to innovate and invest, the situation may decline further. The IMF head is also of the opinion that there is a 15 to 20 percent chance that the Euro zone may suffer deflation.
She said that the risk is that longer term expectations are anchored at a much lower level that it is currently associated with. Falling prices in the Euro zone is another problem for the global economy even when the data shows that it is faring better than it has for years. The U.S. trading on Friday was affected due to the reason that slower economic growth in China, a gloomier outlook for U.S. corporate profits may not see higher returns.