Stocks End Miserable Week Down 7%

Another day of big losses is leaving the U.S. stock market with its worst weekly drop in more than seven years.

The benchmark S&P 500 index ended a brutal week down 7 percent Friday, led by big drops in former market favorites like Facebook and Amazon.

Major U.S. indexes are now 16 to 26 percent below the peaks they reached in the summer and early fall.

Investors fear a recession is coming, and barring huge gains during the upcoming holiday period, when trading is usually quiet, this will be the worst December for stocks since the 1930s.

Former market favorites like Amazon and Facebook took some of the biggest losses as investors remained nervous about the health of the global economy and the prospect of a lengthy partial shutdown of the federal government.

Markets have suffered wide losses over the last week. The major U.S. indexes have fallen more than 11 percent in December, and without a substantial gain over the final days of trading, they are headed for their single worst month since October 2008, when the market was being battered by the effects of the global financial crisis that led to the Great Recession.

Investors around the world have grown increasingly pessimistic about the global economy’s prospects over the next few years. It’s widely expected to slow down, but traders are concerned the cooling might be worse than they previously believed and that the U.S. could eventually tip into a recession.

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The S&P 500 fell 50 points, or 2.1 percent, to 2,416.

The Dow Jones Industrial Average fell 414 points, or 1.8 percent, 22,445. The Nasdaq fell 195 points, or 3 percent, to 6,332.

The Russell 2000 index of smaller-company stocks lost 24 points, or 1.9 percent, to 1,301.

Amazon fell 5.2 percent to $1,385 and Facebook gave up 5.5 percent to $126.11. Apple lost 2.4 percent to $153.02.

The market’s plunge comes even as the Federal Reserve projects that the U.S. economy will grow 3 percent this year, the fastest since 2005, and about 2.3 percent next year, and two years of further increases after that. But as interest rates rise and regions the U.S. does a lot of business with, like Europe and China, also slow down, those estimates might be harder to reach.

Trade tensions between the U.S. and China, the two largest economies in the world, are not the only reason for the expected slowdown in economic growth and corporate profits, but they are adding even more uncertainty to a picture that already looks cloudy.

Stocks surged briefly in morning trading John Williams, the president of the New York branch of the Federal Reserve, said in an interview with CNBC that the Fed is aware the U.S. economy might weaken more significantly next year.

The Fed raised interest rates earlier this week and signaled that it expects to raise them two more times next year. Investors aren’t sure how much that will impair the economy, and the stock market tumbled as they worried the Fed just wasn’t concerned about that possibility.

“What I think the Fed is trying to do is soften the rhetoric a little bit by saying ‘we’re going to be monitoring the economy and we acknowledge that things have eased a bit,'” said Sam Stovall, chief investment strategist for CFRA.

Defense contractors fell after President Donald Trump said he’s withdrawing U.S. soldiers from Syria in an unexpected move. Media reports say the administration might also pull large numbers of soldiers out of Afghanistan. Lockheed Martin fell 1.5 percent to $261.23 and Raytheon shed 2.3 percent to $154.29.

Athletic gear maker Nike jumped 6.2 percent to $71.71 after a better-than-expected third-quarter report. That helped shoe retailer Foot Locker, which gained 2.9 percent to $49.33.

The market’s big losses this month are an outlier because December is generally the strongest time of the year for U.S. stocks. Traders often talk about a “Santa rally” that adds to the year’s gains as positions are closed out and people adjust their portfolios in anticipation of the year to come. Barring huge gains, this will be the worst December for the U.S. market since the 1930s.

OVERSEAS STOCK MARKET UPDATE: Germany’s DAX rose 0.2 percent and the FTSE 100 in Britain added 0.1 percent. France’s CAC 40 was little changed. The Hang Seng index in Hong Kong rose 0.5 percent while South Korea’s Kospi inched up 0.1 percent. The Japanese Nikkei declined 1.1 percent.

All of those indexes have taken steep losses this year. The DAX, Hang Seng and Kospi have all plunged at least 20 percent since early January and the Nikkei is down 17 percent since early October.

Oil prices have declined 40 percent from recent highs amid concerns over a glut in the market and the slowing economy. Benchmark U.S. crude dipped 0.1 percent to $45.86 a barrel in New York. The international standard, Brent crude, declined 1 percent to $53.83 a barrel in London.

Bond prices were little changed. The yield on the 10-year Treasury note stayed at 2.79 percent.

The U.S. dollar also ticked higher after two days of sharp losses brought on by fears about the economy and slower increases in interest rates. The dollar rose 111.28 yen from 111.11 yen. The euro fell back to $1.1391 from $1.1469 and the British pound skipped to $1.2648 from $1.2671.