Why is the stock market falling? The Dow is down nearly 900 points as investors judge the Fed’s profit policies

US stocks fell sharply on Friday as investors continued to assess hawks’ comments on interest rates by Federal Reserve Chairman Jerome Powell a day earlier, as well as a new batch of corporate profits that were largely disappointing.

How to trade stocks?

• The Dow Jones Industrial Average DJIA, -2.01%, fell 879 points, or 2.5%, to 33,914.

• The S&P 500 SPX, -1.96%, fell 107 points, or 2.4%, to 4,286 and was on track for a third straight weekly decline.

• Nasdaq Composite COMP, -1.76% fell 298 points, or 2.3% to trade at 12,875.

On Thursday, the Dow fell 368.03 points, or 1.1%, turning a profit of 331.43 points in intraday trading. The daily change of over 700 points was the largest since March 8, according to Dow Jones Market Data. The S&P 500 fell 1.5%, while the Nasdaq Composite fell 2.1%.

What drives the market?

Stock market weakness intensified on Friday, where Thursday’s sell-off stalled as stocks plummeted in the afternoon after Powell added support for a faster rise in inflation-cooling rates, measures that could include a possible rate hike. percentage with 50 basis points in May.

“It seems that investors have been very complacent about what is coming [Fed] a meeting that will have to change, “said Michael Kramer, founder of Mott Capital, in a note.

The Cboe VIX’s volatility index, + 20.06%, based on options to measure expected volatility over the next 30 days, was too low for a meeting of the Federal Open Market Committee or FOMC on May 3-4, Kramer said. It rose on Thursday and rose another 19.5% to 27.1 on Friday, beating its long-term average of just under 20.

Powell’s remarks appear to have raised the interest rate by half a percentage point on the base option, and the central bank is also likely to announce the start of its balance sheet development, Kramer said.

Meanwhile, federal fund futures traders have a 94% chance that the Federal Reserve will raise interest rates by 75 basis points in June, up from 70% on Thursday and 28% a week ago, according to CME FedWatch.

The reference yield on 10-year TMUBMUSD10Y bonds, 2.895%, has meanwhile fallen slightly to about 2.89% after rising by about 8.1 basis points to 2.917% on Thursday, the highest since December 4, 2018.

Read: How to invest as inflation, higher interest rates and war rage markets

And some warn that the Nasdaq looks particularly vulnerable. The week brought some big news on profits for the technology sector, with investors welcoming Thursday’s Tesla TSLA results, -0.41%, after Netflix’s deeply disappointing NFLX results, -0.46%.

The Fed’s hawkish change and the relentless rise in government bond yields could undermine the former attractiveness of stocks, which were previously seen as the only viable option for many return-seeking investors.

“Investors seem to be moving away from the TINA (No Alternative) narrative lately when it comes to stocks,” said Brian Price, head of investment management at the Commonwealth Financial Network. “This is the second week in a row of significant mutual fund outflows and days like today are unlikely to change sentiment in the future. The only positive conclusion may be that the mood has become too bearish and we can see an increase in the counter-trend at some point in the coming weeks.

In one chart: Investors have just withdrawn a whopping $ 17.5 billion from global stocks. They are just beginning, says Bank of America.

All 11 major sectors of the S&P 500 fell on Friday, with health stocks falling the most after a poor earnings forecast from HCA Healthcare Inc. HCA, -20.74% led to a decline in its shares. Other hospital operators, including Tenet Healthcare Corp. THC, -13.52%, Community Health Systems Inc. CYH, -17.36% and Universal Health Services UHS, -12.73% also fell between 10.4% and 13.2%.

However, of the 99 companies in the S&P 500 that reported first-quarter profits, 77.8 percent exceeded market expectations. Usually 66% of companies exceed estimates, according to Refinitiv.

Next week will mark another big week for profits, with 558 companies reporting, Saxo said. “This is the big test of companies’ ability to pass on costs to their customers,” they said.

Investors may also be unsure ahead of Sunday’s final round of France’s presidential election. An upset victory for far-right candidate Marine Le Pen over incumbent Francois Macron is likely to cause market instability, analysts say.

See: Here is the position of the markets for Sunday’s presidential election in France between Macron and Le Pen

Which companies are in focus?

• Shares of HCA fell 19.6% at the rate of their largest percentage decline since March 16, 2020, when they fell 19.02%, according to Dow Jones Market Data.

• GPS, -18.51% shares fell nearly 19% after a larger-than-expected drop in sales and after the retailer announced the departure of Old Navy CEO Nancy Green.

• The shares of Qualtrics International Inc. XM, -9.47% fell 9.5% after the experience management software company reported better revenue for the first quarter of the fiscal forecast.

• Snap Inc. SNAP, -0.51% shares lost 0.7% after the social media group reported quarterly earnings that did not meet Wall Street expectations.

• The shares of American Express Co. AXP, -1.82% fell 1.4% after exceeding expectations for earnings on Friday amid the continuing recovery in travel and strong spending trends among younger consumers.

• Verizon Communications Inc. VZ, -5.17% fell after its revenue statement showed a net loss of subscribers to subscribers in the last quarter, calling for “competitive dynamics in the industry”, although it said it had its best quarter of broadband replenishment online for more than a decade.

How are other assets traded?

• The ICE US Dollar DXY index, + 0.56%, rose 0.7% to its highest trade since March 2020.

• Bitcoin BTCUSD, -2.26% fell 2.4% to $ 39,500.

• The U.S. oil benchmark CL.1, -2.01%, fell $ 1.72, or 1.7%, to hit $ 102.07 a barrel on the New York Mercantile Exchange, down 4.1% for the week. .

• The GC00 gold, -0.64%, fell $ 13.90, or 0.7%, to settle at $ 1934.30 an ounce, leaving a 2.1% weekly decline.

• Stoxx Europe 600 SXXP, -1.79% fell 1.5%, while London’s FTSE 100 UKX, -1.39% fell 1.4%.

• Shanghai Composite SHCOMP, + 0.23% rose 0.2%, while the Hang Seng Index HSI, -0.21% fell 0.2% in Hong Kong, and Japan’s Nikkei 225 NIK, -1.63% fell by 1%.