Fed Officials Quench Rate Hike Pause Optimism
The S&P 500 closed in the red on Friday as market giants, including Microsoft, exerted downward pressure. The atmosphere was further dampened by two Federal Reserve officials' comments, suggesting that the central bank's aggressive interest rate hike program is far from over.
Mixed Views on Interest Rates Amid Inflation Uncertainty
Despite the Federal Reserve holding rates steady on Wednesday and hinting at a possible half a percentage point increase by year-end, traders predict a pause or even a cut in interest rates in December. However, Fed Governor Christopher Waller and Richmond Fed President Thomas Barkin both pointed to the need for further rate hikes, given that inflation is not returning to the 2% target as quickly as anticipated.
Big Tech Performance Influences Market Direction
The performance of tech giants greatly influenced the market's direction. Both Microsoft and Amazon saw their stocks decline by 1.7% and 1.3% respectively, contributing to the lower close of the S&P 500 and the Nasdaq. Microsoft's stock had only recently achieved a record high.
Nvidia Edges Up, US Market Eyes Upcoming Juneteenth Holiday
In contrast, Nvidia Corp's stock marginally improved by 0.1% after Morgan Stanley increased its price target, ranking the chipmaker as its top pick among U.S. semiconductor companies. The U.S. stock market, however, will pause on Monday in observance of the Juneteenth holiday.
Heavy Trading Volume Amid Options Expiration, Sector Indexes Decline
Trading volume on U.S. exchanges was significant due to the simultaneous expiration of stock options, stock index futures, and index options contracts. The S&P 500 and Nasdaq showed a decline, with eight out of 11 S&P 500 sector indexes, most notably communication services and information technology, reporting losses.
Weekly Market Gains Despite Current Downtrend, Adobe, and iRobot Surge
Despite the current downtrend, the S&P 500, Dow, and Nasdaq reported weekly gains of 2.6%, 1.2%, and 3.2% respectively. Other notable movements included Adobe Inc's rise of 0.9% following a promising earnings forecast and iRobot Corp's 21% surge after approval of Amazon's planned $1.7 billion acquisition.
Concerns Rise as Micron Technology Faces Chinese Ban Impact
On the other end of the spectrum, Micron Technology's stock fell by 1.7% following a warning about the potential impact on global revenue due to a Chinese ban on its memory chip sales to key domestic industries. This added to the broader market concerns, despite the high number of new highs reported for the S&P 500 and Nasdaq.