Stock investors' nerves tested by inflation, omicron, Russia

NEW YORK (AP) — The stock market is losing crucial support from the Federal Reserve. Omicron is causing havoc at businesses around the world. And Russia just might be preparing to invade Ukraine, creating more uncertainty and raising the prospect of even higher oil prices.

No wonder investors are freaking out — and selling stocks.

The S&P 500 has dropped nearly 10% from its record set on the first trading day of the year, the biggest setback for Wall Street since its collapse when the pandemic first struck. And the market’s moves have been fierce amid the mounting uncertainty.

The S&P 500 had four straight drops of 1% through Friday, the longest such streak since late 2018. The streak broke only after the S&P 500 eked out a slight gain on Monday, when a furious 11th-hour rally erased what had been a 4% loss. Tuesday was another volatile, down day for stocks.

For nearly two years, investors had poured money into stocks, confident that the Federal Reserve would help keep share prices upright. The Fed’s super-low interest rates and the rapid U.S. economic recovery from the pandemic recession made stocks a more lucrative bet than safer investments such as low-yielding bonds.

The S&P 500 more than doubled between its pandemic low in March 2020 and the end of last year.

But the Fed is now threatening to end the party.

Determined to cool down the hottest inflation in four decades, the U.S. central bank is moving away from its easy money policies and preparing to raise interest rates. And that spells trouble for the stock market. As rates rise, bonds will look more attractive, likely encouraging investors to shift money out of riskier areas of the market.

Worse, higher rates are likely to slow the U.S. economy, reducing consumer spending — and hurting the...