Stock carnage, Fed’s Powell inflation apology points to policy defeat

The CPI Index, fresh consumer inflation data, is due Wednesday

U.S. stocks plummeted to lows not seen in over a year on Monday, a downward continuation of selling, as investors grow more worried about inflation and a recession despite promises by Federal Reserve Chairman Jerome Powell, who sympathized with the American public grappling with sky-high gas and food prices. 

Ticker Security Last Change Change %
I:DJI DOW JONES AVERAGES 30775.43 -253.88 -0.82%
SP500 S&P 500 3785.38 -33.45 -0.88%
I:COMP NASDAQ COMPOSITE INDEX 11028.735703 -149.16 -1.33%

"I’d like to take this opportunity to speak directly to the American people. Inflation is much too high and we understand the hardship it is causing, and we’re moving expeditiously to bring it back down" said Powell as he kicked off his press conference with reporters following the central bank’s 50 basis point rate hike last week. That followed a surprise 1.4% contraction in the U.S. economy during the first quarter, raising the odds of a recession this year. 

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"The simple fact of the matter is both fiscal and monetary policy blew it," William A. Galston, Ezra K. Zilkha chair and senior fellow of governance studies at The Brookings Institution, told FOX Business. "If there had been an accurate assessment of say the last six months of the Trump administration as to how much stimulus had already been poured into the economy and what its consequences could be," inflation may not have spiked to 40-year highs, he explained. "This has not been a terrific 12 months for the Federal Reserve." 

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S&P 500 YTD

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Investors don’t appear convinced the Fed can balance a teetering economy. On Monday, the S&P 500 fell below the 4,000 level for the first time since April 2021, while the Nasdaq Composite sank below 12,000. Both are down 16% and 26%, respectively, year-to-date.  

Nasdaq Composite YTD

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The Dow Jones Industrial Average is off a lesser 11.3%. 

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Consumer price data for April, due Wednesday, is expected to remain elevated around 8.1%, according to estimates tracked by Trading Economics. That's just below the 8.5% mark, a 40-year high, reached in March.  

Morgan Stanley’s team of strategists, helmed by Seth Carpenter, warned that the ingredients for a global recession are "on the table" Monday.

"Higher rates and falling growth are never good for valuations," he said. "Avoiding a recession is our base case, but markets will have to confront the rising probability of one regardless."

FOX Business' Megan Henney contributed to this report.