U.S. stocks posted losses for the week on Friday as investors braced for tighter monetary policy from the Federal Reserve, and both the S&P 500 and Nasdaq retreated after three straight weeks of gains. .
The Dow Jones Industrial Average rose 137.55 points, or 0.4%, to 34,721.12, while the S&P 500 fell 0.27% to 4,488.28. The Nasdaq Composite fell 1.34% to 13,711.00.
All major averages were down for the week, with the S&P 500 closing down 1.27% and the Nasdaq 3.86%. The Dow is down 0.28% from the start of the week, hitting a straight weekly decline.
The market move comes as investors react to the Federal Reserve’s change in tone, signaling that it will act even more aggressively to combat inflation.
Adam Crisafulli of Vital Knowledge writes: “Not that anything necessarily ‘positive’ is happening or buyers are flocking to the market, but the bad news has been fully absorbed for the time being and The market is waiting for the next data point. .
“We still think nothing really big happened this week other than [Fed Governor Lael Brainard] Tuesday morning’s remarks, and the past few days have been a function of helping to digest her words,” he added.
Technology stocks led the day’s losses as investors dumped riskier stocks in anticipation of higher interest rates limiting the group’s future earnings growth. Chipmakers like Nvidia and Micron, already struggling amid supply chain shortages and looming recession fears, fell 4.5% and 1.4%, respectively, while shares Shares of Tesla, Alphabet and Apple fell 3%, 1.9% and 1.2%.
Shares of Robinhood fell nearly 7% after Goldman Sachs downgrades trading app for sale from neutral. UPS fell nearly 1% as it was downgraded by Bank of America, citing concerns about weakening demand and falling prices in the industry.
The consumer goods and healthcare sectors rallied this week as investors worried about a slowing economy pivoted to stable-earning stocks. Merck and UnitedHealth Group inched up again on Friday. Both stocks closed the week 5% and 6.5% higher, respectively.
Meanwhile, companies in the financial sector such as JPMorgan Chase and American Express have bounced back, giving up some of the previous week’s losses.
Friday’s move comes after the Fed released the minutes of its March meeting on Wednesday, which revealed that policymakers plan to reduce their bond holdings by consensus amount about 95 billion dollars. The central bank is also considering raising interest rates by 50 basis points at future meetings.
Brainard’s comments earlier this week suggested the central bank could begin shrinking its balance sheet at a “rapid pace” as soon as May.
“Their main tool is the Fed’s deposit rate, mostly like that, but above all they’re going to start taking liquidity out of the way,” said Kathy Bostjancic, chief US economist at Oxford Economics. system”. “They’re going to reduce their purchases of treasury and mortgage securities by a trillion a year. That’s a lot of liquidity coming out of the system and private investors will have to fill the void.”
The Fed’s pivot has sent interest rates higher, with 10-year Treasury yields hitting a fresh three-year high on Friday, rising above 2.7%. The rate ended last week at 2.38% and started the year at 1.63%.
Maneesh Deshpande, head of the US division, writes: “The unusually fast bull cycle suggests that in retrospect, the Fed’s (and most economists’) ‘temporary inflation’ narrative is far-fetched. authorities and the Fed now have to actively catch up after falling behind the curve.” equity strategy at Barclays. “We remain cautious and believe that upside momentum is limited.”
Oil prices, which have been volatile during the Russo-Ukrainian war, rose slightly on Friday. US West Texas Intermediate (WTI) Crude Oil up 2.32% to close at $98.26, while Brent crude gained 2.19% to close at $102.78. Energy companies including Occidental Petroleum and Halliburton closed higher on Friday.
Investors are looking forward to next week’s earnings season, which will begin with reports from the big five banks. JP Morgan will herald the bell on Wednesday. Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo will report before market open on Thursday.