Wall Street’s main stock indexes extended losses on Friday as fears of a looming recession sparked by the Federal Reserve’s relentless battle against inflation hammered sentiment.
However, near 6% gains in both Meta Platforms Inc (META.O) and Adobe Inc (ADBE.O) helped the tech-heavy Nasdaq (.IXIC) stave off a steeper fall. The Facebook owner gained after J.P. Morgan upgraded the stock, while the Photoshop maker was boosted by its upbeat first-quarter profit outlook.
Investors are trying to come to terms with Fed Chair Jerome Powell’s recent comments, signaling more policy tightening ahead, and the central bank’s projection that interest rates would breach the 5% mark in 2023, a level not seen since 2007.
“The market is reeling from the aftershock of the Federal Reserve’s hawkish rhetoric and more specifically because of the Fed’s movement of its dot plots to above the 5%,” said Andre Bakhos, managing member at Ingenium Analytics LLC.
Money market bets show at least two 25 bps rate hikes next year and a terminal rate of about 4.9% by midyear, before falling to around 4.4% by the end of 2023.
A fresh economic report showed that U.S. business activity contracted further in December as new orders slumped to their lowest level in just over 2-1/2 years, but softening demand helped to significantly cool inflation.
This comes after Thursday’s data indicating poor U.S. retail sales in November, even as the labor market remained strong with the number of Americans filing for unemployment benefits falling last week.
Wall Street’s main averages touched a five-week low on Friday, on track to end the week with losses of more than 2% each.
Market participants have largely ruled out chances of a Santa rally this year, thanks to the clamp down by major hawkish central banks. The Bank of England and the European Central Bank were the latest ones to indicate an extended rate-hike cycle on Thursday.
Investors will also monitor San Francisco Fed President Mary Daly’s comments at 12 p.m. ET to gauge the pace of future rate hikes.
The simultaneous expiration of stock options, stock index futures and index options contracts later in the day, known as triple witching, could cause volatility through the trading session.
At 10:10 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 343.24 points, or 1.03%, at 32,858.98, the S&P 500 (.SPX) was down 40.26 points, or 1.03%, at 3,855.49, and the Nasdaq Composite (.IXIC) was down 66.23 points, or 0.61%, at 10,744.30.
Exact Sciences Corp (EXAS.O) jumped 23.2% after rival Guardant Health Inc’s (GH.O) cancer test missed expectations, while Digital World Acquisition Corp (DWAC.O) dipped 2.2% following the resignation of finance chief Luiz Braganza.
Declining issues outnumbered advancers for a 3.73-to-1 ratio on the NYSE and 2.07-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and six new lows, while the Nasdaq recorded 20 new highs and 192 new lows.
(This story has been corrected to fix the name of the firm to Ingenium Analytics from New Vines Capital and the designation to managing member from managing director, in paragraph 4)