U.S. stocks ended sharply lower on Friday, with the Dow and the S&P 500 recording their worst week in months as investors worried after the central bank indicated that it could increase interest rates sooner than expected. Also, inflation worries dented investors’ confidence. All the three major indexes ended in the negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 1.6% or 533.37 points to finish at 33,290.08 points, recording its worst week since the end of October 2020.
The S&P 500 declined 1.3% or 55.41 points to close at 4,166.45 points, to hit its session low in the final minutes of the day. The index also recorded its worst week since late February. Financials, energy and utilities sectors were the worst performers.
The Energy Select Sector SPDR (XLE) slid 3%, while the Financials Select Sector SPDR (XLF) and Utilities Select Sector SPDR (XLU) fell 2.4% and 2.6%, respectively. All the 11 sectors of the benchmark index closed in negative territory.
The tech-heavy Nasdaq dropped 0.9% or 130.97 points to end at 14,030.38 points. Shares of Apple, Inc. AAPL and Microsoft Corporation MSFT declined 1% and 0.6%, respectively. Apple carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The fear-gauge CBOE Volatility Index (VIX) was up 16.62% to 20.70. A total of 14.97 billion shares were traded on Friday, higher than the last 20-session average of 10.96 billion.
Investors Worry on Interest Rate Concerns
The Dow had one of the worst weeks, with the index ending in the red for the first consecutive session. Investors had been waiting for some guidance from the Fed on the interest rates, which kept them worried for almost the end week.
However, just as they were expecting the Fed to go easy on the monetary policy, St. Louis Federal Reserve President Bullard, on Friday, gave a more “hawkish” outlook and hinted that the first increase in interest rates could be made as early as 2022. The hawkish view was somewhat expected given that on Wednesday, the Fed added two rate hikes to its 2023 forecast. Also, the Fed increased its inflation projection for 2020.
This was already taking its toll on stocks all throughout the week and Friday’s outlook further dented investors’ spirit. Bullard’s announcement was somewhat expected given that earlier this week comments from Fed Chairman Jerome Powell also hinted as a less accommodative stance by the central bank following recent strong inflation readings. This took a toll on markets on Friday, with all the three indexes ending in negative territory.
No economic data was released on Friday as it was a Federal holiday to observe Juneteenth.
All the three major indexes suffered heavily throughout the week on worries that the Fed would hike interest rates sooner than expected. For the week, the Dow closed 3.5% lower, its second consecutive week of decline and its worst weekly drop since Oct 30, 2020.
The S&P 500 declined 1.9% for the week, ending its three-week winning streak. The tech-heavy Nasdaq lost 0.3% for the week, ending its three-week winning streak.
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