US stocks fell sharply on Friday as investors weighed in on a number of corporate gains and prepared for a more aggressive rise in Federal Reserve interest rates in the coming months.
The S&P 500 fell 1.9 percent, while the Dow Jones Industrial Average fell 580 points, putting both major indexes at a five-week low. The technology Nasdaq Composite fell 1.9%. Meanwhile, the yield on 10-year US bonds remained at 2.9%, the highest level since December 2018.
The losses are the result of remarks by Fed Chairman Jerome Powell at a panel hosted by the International Monetary Fund on Thursday, which signaled that a 50-point increase in interest rates is “on the table” for May, when the US Federal Reserve holds its next policy-making meeting. The Fed chairman also reiterated that politicians have committed themselves to fighting inflation to “front-end charging”.
“Today’s market action reflects the strength of yesterday’s comments by Jerome Powell that the Fed is determined to kill rising inflation and in fact admits that the market can expect growth of 50 basis points in May,” said in a comment on Friday LPL Financial on Quincy Crosby stock. .
Addressing European Central Bank President Christine Lagarde and other officials on Thursday, Powell said the Federal Reserve is committed to bringing inflation back by 2%, targeting the Fed’s goal of an annual price increase.
“We are definitely on the cards to raise interest rates by 50 basis points at the meeting in May,” said Capital2Market President Keith Bliss at Yahoo Finance Live. “The market is pretty good at dictating, if not indicating where this is going to go.”
With the highest level of the consumer price index in four decades, the US Federal Reserve recently signaled that aggressive monetary tightening is underway to contain rising price levels, despite warnings from experts that moving too fast could lead to economic shrinkage.
“The big question is whether profits can really sustain this kind of macro background of slower growth and Fed policy,” Deutsche Bank Wealth Management chief investment officer Deepak Puri told Yahoo Finance Live earlier this week. “It seems that some companies can… historically this has been the case. What is different this time is really trifecta, which is higher capital costs, quantitative tightening, plus the lack of … a big fiscal stimulus. ”
The story continues
Despite Wall Street’s concerns about future policy moves and risks to retailers, the Federal Reserve’s recently published Beige Book report suggests that Main Street sentiment remains broadly positive.
Strategists from LPL Research said the Beige Book Barometer could provide a more accurate picture of the economic outlook than current consumer sentiment, which is weak in the face of rising inflation. Despite the economic slowdown in the first quarter, data from Washington are better than consensus expectations in recent weeks.
“Looking at the Fed’s latest Beige Book, local US businesses remain resilient despite heightened uncertainty,” said LPL’s financial asset allocation strategist Barry Gilbert. “Inflation, COVID and the conflict in Ukraine will keep uncertainty heightened in the short term, but if we can address these challenges, we believe there are solid prospects for growth growth in the second half of the year.
Elsewhere in the markets, key reports released on Friday include quarterly results from American Express (AXP), which fell 1.7% in intraday trading despite declining profits, and Verizon (VZ), down 5.8 percent after the telecommunications giant said it lost 36,000 phones a month to subscribers in the first quarter.
“As expectations of rising interest rates and the prospect of tightening up tightened, there was a series of disappointments in profits,” Crosby said in a note.
Investors continued to monitor Snap Inc. (SNAP) after the company forecast strong growth prospects on Thursday, but warned that supply chain disruptions and inflation could continue to hurt advertising demand. Shares of Snap fell 2.6% on Friday afternoon.
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10:03 a.m. ET: US business slows in April
Business activity in the United States eased in April, with inflationary pressures breaking the manufacturing sector as rising prices weighed on costs.
The Flash Composite Index of Purchasing Managers at S&P Global, which serves as a measure of overall economic health, fell to 55.1 this month from 57.7 in March. Economists polled by Bloomberg expected a reading of 57.9. Each reading above 50 shows growth in the private sector.
“Many companies continue to report a stagnant wind from pandemic demand, but companies are also facing growing challenges from rising inflation and pressure on living costs, as well as persistent supply chain delays and labor constraints,” he said. S&P Global Chris Williamson said in a statement.
“These headwinds, plus heightened concerns about the economic outlook and tightening monetary policy, meant that business confidence in the outlook plummeted in April. However, as overall economic growth and employment remain relatively stable, the policy focus is likely to remain firm on the need to tackle the record high inflationary pressures reported.
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9:30 a.m. ET: Equities increase losses after Powell’s interest rate comments scare investors
Here are the main benchmarks that opened at the beginning of Friday’s trading session:
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S&P 500 (^ GSPC): -15.81 (-0.36%) to 4377.85
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Dow (^ DJI): -229.65 (-0.66%) to 34,563.11
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Nasdaq (^ IXIC): + 0.85 (+ 0.01%) to 13175.50
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Crude oil (CL = F): $ -2.01 (-1.94%) to $ 101.78 per barrel
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Gold (GC = F): – $ 13.10 (-0.67%) to $ 1935.10 per ounce
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10-year treasury (^ TNX): +1.1 bps for 2.9280% yield
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7:00 a.m. ET: Futures lower as S&P 500 heads to another losing week
Here are the main movements in futures trading before the opening on Friday:
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S&P 500 futures (ES = F): -12.75 (-0.29%) to 4377.75
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Dow futures (YM = F): -95.00 (-0.27%) to 34,614.00
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Nasdaq futures (NQ = F): -39.75 (-0.29%) to 13,688.50
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Crude oil (CL = F): $ -1.48 (-1.43%) to $ 102.31 per barrel
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Gold (GC = F): – $ 12.10 (-0.62%) to $ 1936.10 per ounce
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10-year treasury (^ TNX): 0.00 bps (0.00%) to yield 2.9170%
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18:53 ET Thursday: Futures on the stock market are shut down after Powell’s hawkish remarks led to the fall of indices
Here is where the shares were traded before Thursday’s overnight session:
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S&P 500 futures (ES = F): -1.50 (-0.03%) to 4389
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Dow futures (YM = F): -3.00 (-0.01%) to 34,706
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Nasdaq futures (NQ = F): -4.75 (-0.03%) to 13,723.50
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Crude oil (CL = F): -0.03 $ (-0.3%) to $ 103.76 per barrel
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Gold (GC = F): + $ 4.60 (+ 0.24%) to $ 1952.80 per ounce
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10-year treasury (^ TNX): +0.077 bps (+ 2.71%) to a yield of 2.9170%
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, USA, April 14, 2022. REUTERS / Brendan McDermid
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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