U.S. stock markets closed sharply lower On Friday as market participants remained concerned about a recession in 2023. Rigorous interest rate hike by the Fed has dampened investors’ confidence on risky assets like equities. All the three major indexes ended in negative territory for third consecutive days. For the week, these indexes finished in red too.
The Dow Jones Industrial Average (DJI) tumbled 0.8% or 281.76 points to close at 32,920.46. Notably, 25 components of the 30-stock index ended in negative territory while 5 in positive zone. At its session low, the blue-chip index was down nearly 550 points.
The tech-heavy Nasdaq Composite finished at 10,705.41, sliding 1% or 105.11 points due to weak performance of large-cap technology stocks. The major loser of the tech-laden index was Moderna Inc. MRNA, shares of which plummeted 6.7%. Moderna currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 tanked 1.1% to end at 3,852.36. All 11 broad sectors of the benchmark index closed in negative territory. The Consumer Discretionary Select Sector SPDR (XLY), the Energy Select Sector SPDR (XLE), the Health Care Select Sector SPDR (XLV), the Technology Select Sector SPDR (XLK), the Utilities Select Sector SPDR (XLU) and the Real Estate Select Sector SPDR (XLRE) plummeted 1.9%, 1.2%, 1.5%, 1.3%, 1.7% and 3%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 0.9% to 22.62. A total of 17.28 billion shares were traded on Friday, lower than the last 20-session average of 11.3 billion. Decliners outnumbered advancers on the NYSE by a 2.47-to-1 ratio. On Nasdaq, a 1.66-to-1 ratio favored declining issues.
U.S. stocks continued to suffer on Friday, for the third consecutive days after the Fed announced a 50-basis point rate hike, with losses deepening. Stocks took a further hit as disappointing retail sales for November sparked fears of a slowing economy.
On Wednesday, the Fed increased interest rates by another 50 basis points. Fed Chair Jerome Powell had earlier hinted that the central bank could slow down its pace of rate hikes after increasing interest rates by 75 basis points for the fourth consecutive time since June.
The Fed did slow down the pace but Powell didn’t paint a rosy picture of the future and indicated that the central bank would continue increasing interest rates at regular intervals through 2023.
Wednesday’s hike took the benchmark range of 4.25% to 4.50%, and the Fed projected it to top out at 5.25% before it takes a call on pausing the hikes. This is higher than the September forecast of 4.75%.
Recession fears were further ignited after central banks in Europe also hinted at hiking interest rates through 2023. Both the Bank of England and the European Central slowed down their pace of rate hikes but increased interest rates by 50 basis points. Investors were once again alarmed by this as they believe that ongoing rate increases could push the economy into a recession, setting the tone for a panic sell-off.
Last week was a disappointing one for Wall Street. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – tumbled 1.7%, 2.1% and 2.7%, respectively. Major indexes booked back-to-back weekly losses for the first time since the week ended Sep 30.
Several major economic data like the retail sales, industrial production and ISM Manufacturing Index for November, severe devastation of the housing sector in 2022 due to soaring mortgage rate, growing business inventories and lower consumer sentiment are indicating significant cool down of the U.S. economy.
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