Stocks Extend Losses as Investors Weigh Powell’s Hardline Comments and More Corporate Earnings

US stocks slumped on Friday afternoon to end another week in the red as investors weighed a cluster of corporate earnings and braced for more aggressive monetary tightening by the Federal Reserve in coming months.

The S&P 500 slumped 2.8%, marking its second-worst day of the year, while the Dow Jones Industrial Average shed 980 points in its worst day since October 2020. The tech-heavy Nasdaq Composite fell 2.6% . Meanwhile, the 10-year US Treasury yield stood at 2.9%, the highest level since December 2018.

“Markets are very concerned about the increasing likelihood of a policy error by the Federal Reserve,” Harris Financial Group managing partner Jamie Cox said in a note. “When a Fed official suggests a 50 basis point hike, markets immediately start trying to price in 75 basis point hikes, it’s really crazy.”

The losses follow comments by Fed Chairman Jerome Powell at a panel hosted by the International Monetary Fund on Thursday that a 50 basis point rate hike was “on the table” for May, when the bank US central bank holds its next policy-setting meeting. The Fed Chairman also reiterated that policymakers were committed to “front-load” inflation-fighting efforts.

“Today’s market action reflects the power of Jerome Powell’s comments yesterday, that the Fed is determined to crack down on rising inflation and virtually acknowledges that the market can expect a 50 basis point hike in May,” the strategist said. LPL Financial chief equity officer Quincy Krosby in comments on Friday. .

Addressing European Central Bank President Christine Lagarde and other officials on Thursday, Powell said the Federal Reserve has committed to bringing inflation back to 2%, referring to the Fed’s target for annual price increases.

“We are definitely on the cards for a 50 basis point rate hike at the May meeting,” Capital2Market Chairman Keith Bliss said on Yahoo Finance Live. “The market is pretty good at dictating, if not indicating, where this is going to go.”

With the main Consumer Price Index at its highest level in four decades, the US Federal Reserve has recently signaled that aggressive monetary tightening is underway to curb rising price levels despite warnings of experts that acting too quickly could cause an economic contraction.

“The big question is whether earnings can really sustain this kind of macro backdrop of slower growth and Federal Reserve policy,” Deutsche Bank Wealth Management chief investment officer Deepak Puri told Yahoo Finance Live. early this week. “It seems that certain companies can… historically that has been the case. What’s different this time is really the trifecta, which is higher capital costs, quantitative tightening, plus the lack of…a big fiscal stimulus.”

Despite Wall Street’s concerns about upcoming policy moves and the risks they pose to traders, a reading of the Federal Reserve’s recently released Beige Book suggests Main Street sentiment remains generally positive.

Strategists at LPL Research said the Beige Book Barometer may provide a more accurate picture of the economic outlook than current consumer confidence, which has been weak in the face of soaring inflation. Despite an economic slowdown in the first quarter, data from Washington has been better than consensus expectations in recent weeks.

“Looking at the Fed’s most recent Beige Book, local US companies remain resilient despite heightened uncertainty,” said LPL financial asset allocation strategist Barry Gilbert. “Inflation, COVID and the conflict in Ukraine will keep uncertainty high in the near term, but if we can overcome these challenges, we believe there is a strong outlook for a growth rebound in the second half of the year.”

Elsewhere in the markets, major reports released on Friday included quarterly results from American Express (AXP), which fell 1.7% in intraday trading despite reporting rising earnings, and Verizon (VZ) , which fell 5.8% after the telecoms giant said it lost 36,000 phones a month. subscribers during the first quarter.

“Exacerbating the expectation of rate hikes and the prospect of quantitative tightening were a number of earnings disappointments,” Krosby also said in his note.

Investors kept an eye on Snap Inc. (SNAP) after the company on Thursday projected a strong outlook for user growth, but warned that supply chain disruptions and inflation could continue to hurt ad demand. Snap shares fell 2.6% on Friday afternoon.

4:00 pm ET: Stocks post another week of losses as traders brace for faster rate hikes

These were the main movements in the markets at the end of the trading session this week:

  • S&P 500 (^GSPC): -121.72 (-2.77%) to 4,271.94

  • below (^ DJI): -979.32 (-2.81%) to 33,813.44

  • Nasdaq (^IXIC): -335.36 (-2.55%) to 12,839.29

  • Crude (CL=F): -$2.18 (-2.10%) at $101.61 a barrel

  • Prayed (GC=F): -$13.20 (-0.68%) at $1,935.00 per ounce

  • 10-year Treasury (^TNX): -1.1 bps to produce 2.9060%

10:03 am ET: US business activity slows in April

Business activity in the US slowed in April, with inflationary pressures taking a toll on service sector output as rising prices weighed on spending.

S&P Global’s Flash Composite Purchasing Managers’ Index, which serves as a gauge of overall economic health, fell to a reading of 55.1 this month from 57.7 in March. Economists surveyed by Bloomberg had expected a reading of 57.9. Any reading above 50 indicates growth in the private sector.

“Many businesses continue to report a tailwind from pent-up demand from the pandemic, but businesses are also facing growing challenges from rising inflation and declining cost of living, as well as persistent supply chain delays and labor restrictions,” said the chief business economist at S&P Global. Chris Williamson said in a statement.

“These headwinds, in addition to heightened concerns about the economic outlook and tightening monetary policy, caused business confidence in the outlook to fall sharply in April. However, with the overall pace of economic growth and hiring remaining relatively strong, for now the focus from a policy perspective is likely to remain firmly on the need to rein in the record inflationary pressures signaled by the survey.

9:30 a.m. ET: Stocks extend losses after Powell rate comments spooked investors

This is where the major benchmarks opened at the start of the trading session on Friday:

  • S&P 500 (^GSPC): -15.81 (-0.36%) to 4,377.85

  • below (^ DJI): -229.65 (-0.66%) to 34,563.11

  • Nasdaq (^IXIC): +0.85 (+0.01%) at 13,175.50

  • Crude (CL=F): -$2.01 (-1.94%) at $101.78 a barrel

  • Prayed (GC=F): -$13.10 (-0.67%) at $1,935.10 per ounce

  • 10-year Treasury (^TNX): +1.1 bps for throughput 2.9280%

7:00 a.m. ET: Futures lower as S&P 500 gears up for another losing week

These were the major moves in futures trading before the opening bell on Friday:

  • S&P 500 Futures (EN=F): -12.75 (-0.29%) to 4,377.75

  • dow futures (YM=F): -95.00 (-0.27%) to 34,614.00

  • Nasdaq futures (NQ=F): -39.75 (-0.29%) to 13,688.50

  • Crude (CL=F): -$1.48 (-1.43%) at $102.31 a barrel

  • Prayed (GC=F): -$12.10 (-0.62%) at $1,936.10 per ounce

  • 10-year Treasury (^TNX): 0.00 bps (0.00%) to produce 2.9170%

6:53 p.m. ET Thursday: Stock futures muted after Powell’s comments sent indices down

Here is where the stock was trading before the overnight session on Thursday:

  • S&P 500 Futures (EN=F): -1.50 (-0.03%) to 4,389

  • dow futures (YM=F): -3.00 (-0.01%) to 34,706

  • Nasdaq futures (NQ=F): -4.75 (-0.03%) to 13,723.50

  • Crude (CL=F): -$0.03 (-0.3%) at $103.76 a barrel

  • Prayed (GC=F): +$4.60 (+0.24%) at $1,952.80 per ounce

  • 10-year Treasury (^TNX): +0.077 bps (+2.71%) for 2.9170% throughput

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., April 14, 2022. REUTERS/Brendan McDermid

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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