© Reuters. FILE PHOTO: A trader works on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, US, Sept. 13, 2022. REUTERS/Andrew Kelly
By David French
(Reuters) – Wall Street’s major indices slumped and closed well Friday, as troubled investors continued to reposition themselves to reflect fears that the US Federal Reserve’s aggressive interest rate policy to curb inflation will send the US economy into recession Push.
The Dow narrowly avoided finishing more than 20% lower than its all-time record of 36,799.64 points on Jan. 4, meaning the blue-chip index failed to hit a bear market label, according to a commonly used definition.
The S&P 500 and Nasdaq are already in a bear market.
However, all three indices suffered heavy weekly declines. The Nasdaq fell 5.03% – down more than 5% for the second week in a row – with the S&P falling 4.77% and the Dow 4% lower.
After making strong gains in the past two years, Wall Street was rocked in 2022 by concerns about a host of issues, including the conflict in Ukraine, the energy crisis in Europe, the flare-ups of COVID-19 in China and the tightening of the financial system. conditions around the world.
Half a dozen central banks, including in the United States, Britain, Sweden, Switzerland and Norway, hiked interest rates this week to fight inflation, but it was the signal from the Fed that it expects high U.S. interest rates to 2023 will last, overtaking the markets .
“There were some optimists who said inflation could be brought under control, but the Fed effectively told them to sit down and shut up,” said David Russell, VP of Market Intelligence at TradeStation Group.
“The Fed is trying to take the bandage off and try to quell inflation while the job market is still strong.”
The bleak outlook of a handful of companies has also contributed to the woes in a seasonally weak period for the markets. After FedEx Corp (NYSE:) withdrew its earnings forecast last week, it outlined cost savings of up to $2.7 billion on Thursday after falling demand hammered first-quarter profits.
The delivery giant’s inventory fell 3.4% to its lowest level since June 30, 2020.
The S&P 500’s estimated earnings growth for the third quarter is 4.6% lower than last week’s 5%, according to data from Refinitiv.
Goldman Sachs (NYSE:) lowered its year-end benchmark target by about 16% to 3,600 points.
“We’re having everyone reassess just how far the Fed will go, and that’s troubling for the economy,” said Ed Moya, senior market analyst at OANDA.
“It’s going to be the baseline scenario that this economy will have a hard landing, and that’s a terrible environment for US equities.”
The S&P 500 fell 486.27 points, or 1.62%, to 29,590.41, the S&P 500 lost 64.76 points, or 1.72%, to 3,693.23 and the S&P 500 fell 198.88 points , or 1.8%, to 10,867.93.
All 11 major S&P sectors fell, led by a 6.8% decline in energy stocks. Oil and gas-related stocks were ravaged by the decline in crude oil prices, which fell in response to demand concerns in a recessionary environment and the strong US dollar. [O/R]
Oilfield services were particularly affected, with Helmerich and Payne Inc falling 11.2% and Schlumberger (NYSE:) falling 8.4%. Halliburton (NYSE:) Co. fell 8.7% to record its lowest return since Jan. 3.
Price sensitive technology and growth stocks fell with Alphabet (NASDAQ:) Inc, Apple Inc (NASDAQ:), Amazon.com (NASDAQ:), Microsoft Corp (NASDAQ:) and Tesla (NASDAQ:) Inc. all fell between 1.3% and 4.6%.
Shares of Costco Wholesale Corp (NASDAQ:) fell 4.3% after the big-box retailer reported a decline in profit margins in the fourth quarter.
The CBOE volatility index, also known as the Wall Street fear meter, rose to a three-month high of 29.92.
Volume on US exchanges was 13.29 billion shares, compared to the full session average of 11.11 billion over the past 20 trading days.
The S&P 500 made no new 52-week highs and 151 new lows; the Nasdaq Composite recorded 10 new highs and 823 new lows.