By Stephen Culp
NEW YORK (Reuters) – U.S. stocks fell broadly on Friday, capping a week dominated by U.S. Federal Reserve Chairman Jerome Powell’s testimony in which he signaled more interest rate hikes ahead but vowed the central bank would proceed with caution.
All three major U.S. stock indexes were in the red but off session lows. Interest-sensitive megacap stocks were the biggest drag on the tech-laden Nasdaq composite index, led by Microsoft Corp, Nvidia Corp and Tesla Inc.
With few market-moving catalysts this week aside from Powell’s congressional testimony, all three indexes were set to notch weekly losses, closing the book on a weeks-long rally.
The Nasdaq had set course to snap its eight-week winning streak, its longest since March 2019, while the S&P 500 appeared as if it would break its five-week rally, its longest since November 2021.
The S&P 500 was on track to log its biggest Friday-to-Friday percentage drop since early March, when the regional banking liquidity crisis hit.
“What we’re seeing today is a flight to safety,” said Greg Bassuk, chief executive of AXS Investments in New York. “Investors are definitely exhibiting renewed fears of a U.S. recession, and inflation and Fed policy remain the investor narrative.”
San Francisco Fed Bank President Mary Daly said in an interview with Reuters that two more rate hikes this year is a “very reasonable” projection, while echoing Chairman Powell’s call for a more caution in policy decisions.
Atlanta Fed President Tom Barkin said late Thursday he was unconvinced inflation is on a steady path down to the 2% target, but added he would not predict the outcome of the central bank’s July policy meeting.
Financial markets have baked in a 74.4% likelihood that the Fed will resume hiking the Fed funds target rate by another 25 basis points at the July meeting, according to CME’s FedWatch tool.
“The change from economists’ views that the Fed rate hikes were over to now signaling for one or two more rate hikes this year have investors concerned that we may be headed for a hard landing and possibly a recession later this year,” Bassuk added.
At 2:27PM ET, the Dow Jones Industrial Average fell 183.44 points, or 0.54%, to 33,763.27, the S&P 500 lost 26.47 points, or 0.60%, at 4,355.42 and the Nasdaq Composite dropped 99.48 points, or 0.73%, to 13,531.13.
All 11 of the major S&P 500 sectors were in negative territory, with utilities suffering the largest percentage loss.
Chips weighed on tech shares, with the Philadelphia SE Semiconductor index down 1.5%.
Used car marketplace Carmax Inc posted better-than-expected quarterly profit, sending its shares surging 9.4%.
Starbucks Corp fell 2.7% after its unions said around 3,500 U.S. workers will strike next week to protest the chain’s ban on Pride month decorations at its cafes.
The Russell 2000 is expected to finalize the reconstitution of its stock components after the closing bell, which tends to cause a surge in trading volume as the session draws to a close.
Declining issues outnumbered advancers on the NYSE by a 2.02-to-1 ratio; on Nasdaq, a 2.04-to-1 ratio favored decliners.
The S&P 500 posted 18 new 52-week highs and four new lows; the Nasdaq Composite recorded 32 new highs and 112 new lows.
(Reporting by Stephen Culp; Additional reporting by Shubham Batra and Shristi Achar A in Bengaluru; Editing by Richard Chang)
