European markets have been slow because people are worried about the world economy.

By the middle of the morning, the pan-European Stoxx 600 was down 0.2%. Stocks in the telecoms industry were down 1.2%, while oil and gas stocks were up 0.8%.

Next week, the U.S. Federal Reserve is likely to raise interest rates by 50 basis points. Even though that would be a smaller increase than the last few rate hikes, investors are getting more worried about whether the central bank will be able to avoid a recession next year while trying to stop inflation.

After the S&P 500 fell for the fifth day in a row, U.S. stock futures were down a little bit on Thursday morning as Wall Street tried to figure out how likely a downturn was.

Overnight, the mood in the Asia-Pacific region changed for the better. Hong Kong's Hang Seng index went up by more than 3% on Thursday after a local news outlet said the city is thinking about easing Covid measures even more, such as getting rid of the rule about wearing masks outside and making testing for new arrivals less strict. Most of the other markets in the region, on the other hand, went slightly into the red.

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If the Federal Reserve doesn't do this, the U.S. economy and S&P 500 will have a hard landing.

The biggest reason to be hopeful that a recession caused by the Federal Reserve can be avoided next year was just taken away. In September and October, hourly pay went up, and in November, it went up even more. This pushed wage growth far above the range that is in line with the Fed's 2% inflation target. Nearly everyone agrees that the Fed needs to raise its inflation target, at least in practice, if the U.S. economy is to avoid a hard landing and a bigger drop for the S&P 500. The Fed might be willing to do this, but the economy would still need to cool down more before they stop raising interest rates. "The 2% inflation target is a lot more flexible than the Fed lets on," RSM chief economist Joe Brusuelas told IBD. "I don't think there's any constituency out there for the bloodletting that would be necessary." Brusuelas thinks that for inflation to return to 2%, the Fed would have to raise unemployment to 6.7%. But most of the way to 3% inflation ...

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