Flaring economic worries threaten US stocks rally

NEW YORK -Economic fears are roiling Wall Street, as worries grow that the Federal Reserve may have left interest rates elevated for too long, allowing them to hurt U.S. growth.

For months, investors had been heartened by cooling inflation and gradually slowing employment, believing they bolstered the case for the Fed to begin cutting interest rates. That optimism drove big gains in stocks: the S&P 500 remains up 12% this year, despite recent losses; the Nasdaq has gained nearly 12%.

Broader markets also showed signs of unease. The Cboe Volatility index - known as Wall Street’s fear gauge - hit its highest since March 2023 on Friday as demand for options protection against a stock market selloff rose.

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