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It's been a volatile quarter on Wall Street, fueling fears about a possible recession

AILSA CHANG, HOST:

It has been one of the most volatile quarters on Wall Street in recent memory. Investors are nervous about markets and the economy, and there are fears about the risk of a recession. As the first quarter of 2022 comes to a close, NPR's David Gura joins us now to explain all of this volatility. Hey, David.

DAVID GURA, BYLINE: Hey, Ailsa.

CHANG: So walk us through what's been happening here.

GURA: Well, Russia's invasion of Ukraine had a profound effect on markets. The Dow fell into a correction. So did the S&P 500. And the NASDAQ dropped more than 20% from its recent high into a bear market before stocks regained ground. On top of that, we've seen some incredible volatility in commodities prices - yes, in oil, but also in wheat and metals like nickel. And this happened where there was already a lot of nervousness about inflation, prices surging on pretty much everything from food to clothing to cars. Well, prices have continued to climb, and we got the latest measure of that today. The inflation gauge the Fed Reserve likes to use showed prices have been rising at their fastest pace since 1982. The Fed has doubled down on its commitment to fighting inflation. It's already raising interest rates, started hiking them this month, for the first time since 2018. And that stands to have a big impact on markets and the economy.

Gargi Chaudhuri is an investment strategist at BlackRock, and she told me Wall Street is now gaming out what it would mean for the economy if the Fed were to decide to act even more aggressively going forward.

GARGI CHAUDHURI: What might the impact on growth be in the economy - what that might do to mortgage rates.

GURA: The Fed is also wrestling with new economic uncertainty, the fallout from the war in Ukraine, including, Ailsa, higher oil prices.

CHANG: Yeah. Well, what has been the impact specifically from that surge in oil prices?

GURA: Oil prices have skyrocketed. You look at Brent Crude, the international benchmark, and it went from around $80 a barrel to almost $140 a barrel.

CHANG: Wow.

GURA: That's the highest it's been since 2008. Of course, this is hurting regular people. You've seen it at the gas pump. I've seen it at the gas pump. A gallon of regular now over 4.22 on average, according to AAA. That's a little less expensive than what it was earlier this month, but it's still high. And that's what led to this big announcement at the White House today - the administration saying it will release around a million barrels a day over the next six months from the U.S. Strategic Petroleum Reserve to get more oil flowing, to try to push down prices. This is the biggest release from the Strategic Petroleum Reserve ever. But it's going to take some time to see what effect that's going to have and if the effect is going to be temporary.

CHANG: And what about the markets, David? Like, what do you think they're telling us right now?

GURA: You know, while we've seen the stock market recover since around mid-March, there are a lot of unanswered questions still. Are these gains going to hold, given what's happened in Ukraine, given the challenges the Fed faces, given how much prices have continued to go up? And the big worry is, is the U.S. economy headed for a recession? One potential warning sign is the sell-off that we've seen in the bond market recently.

And traditionally, bonds are a pretty good indicator of the outlook for the economy. Right now they're flashing some warning signs. There are a few positive trends I want to highlight. The labor market remains healthy. We're going to get new data on that on Friday, jobs data for the month of March. And then there are corporate profits, which have been pretty strong. And in the coming days, companies are going to give us new information on how they've navigated all these challenges, and they're going to share their forecasts for the months ahead. But all in all, Ailsa, as we start the second quarter, a lot of uncertainty remains, and markets are likely to remain volatile.

CHANG: Great. NPR's David Gura - thank you so much, David.

GURA: Thank you. Transcript provided by NPR, Copyright NPR.