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Stocks plummet in worst day since 2020 as economic forecast darkens - YouTube
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U.S. Financial markets had their
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worst day since the start of the
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pandemic.
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Just one day after the Dow Jones
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industrial average posted its
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best day since 2020.
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The Dow lost 1063 points.
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To close at 32,997.
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Down 3%.
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The tech heavy NASDAQ took a
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bigger hit overall down 647.
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A fall of nearly 5%.
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The S&P 500 fell 153 points to
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close at 4146, losing three and
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a half percent.
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The S&P 500 has dropped or than
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13% since the start of the year.
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To help explain what is behind
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all this, I'm joined by special
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correspondent Catherine rampell.
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Hello, Catherine.
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Yesterday there was this big
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climb, 900 points.
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Today it is down over 1000.
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What is happening?
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>> It is a lot of whiplash.
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This record growth since 2020
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followed by a record decline
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since 2020.
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I think a sickly yesterday there
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was a bit of euphoria in the
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markets.
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Fed chair Jay Powell indicated
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the fed might be a little less
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hawkish than some traders had
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expected him to be.
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He basically said for right now
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we are not considering a three
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quarters of a percentage point
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rate hike anytime soon.
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There was this buying spree
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because a lot of people thought
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the fed was going to start
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tightening even faster.
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Today, people woke up, maybe
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with a bit of a hangover and
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looked at the productivity
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numbers that came out this
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morning that were not great.
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Productivity went down in the
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first quarter.
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They said maybe we overreacted
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yesterday.
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You saw a big selloff and some
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panicking partly driven also by
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some earnings misses from some
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tech companies.
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Judy: It was not there was
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anything new from the federal
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reserve.
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It was these other factors and
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just time to sleep on it?
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>> Something like that probably.
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I think to some extent, markets
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are driven by animal spirits.
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We cannot entirely pin down what
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drives a particular increase or
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a particular decrease from
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day-to-day.
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It does look like a lot of
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traders thought maybe they
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overreacted to that phrasing
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from the fed yesterday and they
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are looking at rates going up
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for the rest of this year,
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potentially next year as well
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and that always weighs on
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stocks.
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Judy: What about the underlying
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factors?
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The underlying strength or
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weakness of the economy overall?
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To what extent does that play
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in?
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>> Over the last few months, I
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think the economic forecast has
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darkened somewhat because we
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have gotten hit with a series of
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unfortunate and bad shocks.
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I'm talking about the lockdowns
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in China affecting manufacturing
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hubs and disrupting supply
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chains.
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There is the war in Ukraine
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whose primary tragic consequence
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is the loss of life but that has
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also disrupted food markets
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around the world, energy markets
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around the world, fertilizer,
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commodities.
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As well as a bunch of other
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things like a drought in
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California and avian flu.
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All those things are likely to
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drive inflation higher which
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suggests the fed will have to
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act even more aggressively to
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get inflation down and
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historically when the fed has
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had to raise interest rates to
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deal with inflation, most of the
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time they have tipped us into
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recession.
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If they have to act even more
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aggressively today, there is a
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greater risk we will have a
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downturn in the next year or so.
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Judy: Fasten our seatbelts.
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The ride continues.
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Thank you very much.
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>> Thank you.
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