Wall Street dropped on Friday, with Microsoft and Nvidia leading the charge. Investors were concerned about the potential inflation and strong U.S. economy, leading to more interest rate hikes by the Federal Reserve. The main indexes were on track to end the week in the red as economic data showed elevated inflation, a tight job market, and resilience in consumer spending, giving the Fed more room to raise borrowing costs.
Goldman Sachs and Bank of America Forecast Three More Rate Hikes
Goldman Sachs and Bank of America have forecast three more rate hikes this year, with each hike being a quarter of a percentage point, up from their previous estimate of two rate rises. Traders expect at least two more rate increases, with the Fed rate predicted to peak at 5.3% by July as the central bank tries to cool the economy and reduce inflation.
Fed Officials Speak on the Need for Interest Rate Hikes
Adding to the gloom, Fed Governor Michelle Bowman said the central bank would need to keep raising interest rates until it makes more progress tackling inflation. On the other hand, Richmond Fed President Thomas Barkin said that the central bank still needs to raise interest rates, but it could stick with quarter-point increases.
Major Tech Companies Suffer Losses on Wall Street
Microsoft, Nvidia, and Amazon.com Inc. lost over 2% each and weighed heavily on the S&P 500 as the yield on 10-year Treasury notes hit a three-month high. Seven of the 11 S&P 500 sector indexes declined, with energy being the biggest loser, down 3.75%, followed by a 1.73% loss in information technology. The CBOE Volatility index, also known as Wall Street's fear gauge, traded above 20 points for a second session in a row.
S&P 500 and Nasdaq End Friday Lower
In afternoon trading, the S&P 500 was down 0.79% at 4,058.27 points, while the Nasdaq declined 1.24% to 11,708.36 points. The Dow Jones Industrial Average was down 0.08% at 33,668.55 points. The S&P 500 has gained about 6% in 2023, while the Nasdaq rebounded 12% after deep losses last year.
Other Market Movements on Friday
Moderna Inc fell 5% after its experimental messenger RNA-based influenza vaccine delivered mixed results in a study. Deere & Co surged over 8% after the world's largest farm equipment maker raised its annual profit and beat quarterly earnings expectations. Lithium miners Livent Corp, Albemarle Corp, and Piedmont Lithium Inc all fell more than 10% due to concerns about weakness in Chinese prices for EV battery metal.
U.S. stock markets will be closed on Monday because of Presidents' Day. Across the U.S. stock market, declining stocks outnumbered rising ones by a 1.7-to-one ratio. The S&P 500 posted six new highs and one new low, while the Nasdaq recorded 55 new highs and 57 new lows.