U.S. stocks traded lower on Friday, on track to cement back-to-back weekly losses for the first time since late September, as recession fears and fading hopes for a Federal Reserve pivot take a toll.
How are stocks trading?
- The S&P 500
fell 62 points, or 1.6%, to 3,833, according to FactSet data.
- Dow Jones Industrial Average
shed 468 points, or 1.4%, to 32,734.
- Nasdaq Composite
fell 153 points, or 1.4%, to 10,658.
On Thursday, the Dow industrials tumbled 2.3%, its biggest daily drop since Sept. 13. The S&P 500 fell 2.5% and the Nasdaq Composite sank 3.2%. All three indexes Friday were on track to book back-to-back weekly losses for the first time since the week ended Sept. 30.
What’s driving the markets?
Investors reacted negatively to a flurry of interest-rate hikes from global central banks and more discouraging signs about the U.S. economy and spending power of the consumer.
The Federal Reserve sent stocks reeling after it delivered a 50 basis point rate hike on Wednesday, while indicating interest rates could remain above 5% into 2024, potentially exacerbating a looming recession. Economists now expect a recession could begin in the first half of next year.
Markets also appeared to be waking up to the notion that the Fed won’t be pivoting back to interest-rate cuts any time soon, said Paul Nolte, portfolio manager at Kingsview Asset Management.
“Powell has been very consistent with his message to the markets: We’re going to keep raising rates. We’re on this path. We might do it more slowly but we’re not going to stop and pivot,” Nolte said. “It’s just taking the market a while to get comfortable with this.”
Jeffrey Kleintop, chief global investment strategist at Charles Schwab & Co, said the market “bought the rumor” of a decrease in the size of Fed rate hikes from 75 basis points to 50 basis points, and now it’s “selling the news,” because it’s coming with more signs of recession.
A flurry of expiring equity options and futures contracts could also make for a volatile Friday session.
On the economic front, investors also were tracking Friday’s S&P Global “flash” U.S. services sector index, which showed business conditions eroded again in December, along with reports of more layoffs in finance, technology and media. Goldman Sachs Group
is planning to lay off 4,000 people, according to news reports, in part as higher rates cut into banks’ dealmaking and fundraising profits.
The New York Fed’s John Williams said Friday that interest rates need to top the inflation rate to get prices under control, saying that pricing pressures are still “stubbornly high,” and that he expects rates will hold above 5% next year.
Outside the U.S., the European Central Bank was among the central banks that hiked this week. It also helped push European bond yields and the euro higher by broadcasting an aggressive message.
The ICE U.S. Dollar Index
which measures the greenback against a basket of major rivals, was softer on Friday, while oil prices
were also lower. The yield on the 10-year Treasury note
was up 7.6 basis points to 3.526%.
All 11 S&P 500 sectors are set to finish the week in the red with the exception of energy, although energy stocks were leading the market lower on Friday with a drop in oil prices.
- Meta Platforms Inc.
shares were up 3.9% Friday, helping to bolster the Nasdaq as analysts cheered the company’s cost-cutting efforts.
- Several real-estate investment Trusts focused on corporate properties and logistics centers were under pressure on Friday, including Prologis Inc.
Invitation Homes Inc.
Digital Realty Trust
and SL Green Realty Corp.