FilippoBacci
U.S. stocks on Friday fluctuated into the homestretch of the trading session, with Wall Street’s major averages wavering after holding onto gains through most of the day.
Markets are on track to end a tough week with hefty losses, characterized by a bruising sell-off sparked by the Federal Reserve’s signal of higher rates for longer. A few central bank speakers largely echoed that theme earlier in the day.
Approaching the final hour of trading, the tech-heavy Nasdaq Composite (COMP.IND) had given up gains of nearly 1%. It was last up 0.09% to 13,235.44 points. The benchmark S&P 500 (SP500) was lower by 0.07% to 4,326.90 points, while the blue-chip Dow (DJI) slipped 0.24% to 33,989.50 points.
technology stocks, which had been under significant pressure lately, were still up. Apple (AAPL) added about 1% as its iPhone 15 models officially went on sale.
Also in the spotlight was Activision Blizzard (ATVI). Its shares climbed about 2% after the UK issued a preliminary approval for Microsoft’s (MSFT) proposed $69B takeover of the videogame publisher.
Ford (F) garnered some headlines, with the stock among the top percentage gainers on the S&P 500 (SP500) after The United Auto Workers said they had made significant progress in their talks with the carmaker. The union also called for strikes at 38 General Motor (GM) and Stellantis (STLA) locations.
Looking at the 11 S&P sectors, eight had now switched over to negative territory, with Consumer Discretionary and Financials the top two losers. Energy, technology and Communication Services were the three gainers.
On a weekly basis, the benchmark S&P (SP500) was set for its worst performance since early March, down 2.77%. The Nasdaq (COMP.IND) was down 3.45% and the Dow (DJI) was down 1.82%.
Markets on Wednesday were shaken by the Fed’s latest updated dot plot, which signaled one more rate hike this year along with fewer rate cuts in 2024. Moreover, Powell’s comment that a soft landing was not a baseline expectations also rattled investor confidence. The selling deepened on Thursday, with all three major averages falling more than 1% and the Nasdaq (COMP.IND) approaching losses of nearly 2%.
Treasury yields showed a significant reaction to the Fed too, with the 2-year yield (US2Y) – which is more sensitive to interest rate decisions – hitting a level not seen since 2006 on Wednesday and the longer-end 10-year yield (US10Y) topping 4.5% on Thursday. On Friday, yields were subdued, with the former down 4 basis points to 5.11% and the latter down 5 basis points to 4.43%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
“Markets experienced another big sell-off yesterday, with longer-dated yields hitting new highs for the cycle across several countries. In fact, the U.S. 10yr Treasury yield has surpassed the 4.5% mark in trading overnight, which is the first time that’s happened since 2007,” Deutsche Bank’s Jim Reid said.
“In large part, (these) moves have been driven by the prospect that central banks are likely to keep policy rates in restrictive territory for longer than previously thought. That was prompted initially by the Fed’s hawkish dot plot on Wednesday. But the sell-off then got fresh momentum yesterday from the U.S. weekly jobless claims, which came in at their lowest since January at 201k. That pushed the 4-week moving average to its lowest level since March, offering further evidence that this strength doesn’t just look like a blip,” Reid added.
Traders had some economic data and some comments from Fed speakers to digest on Friday. S&P Global’s U.S. PMI composite flash reading for September slipped to a seven-month low.
Meanwhile, Boston Fed President Susan Collins in prepared remarks said that further interest-rate hikes were “certainly not off the table.” Moreover, Fed Governor Michelle Bowman said that the central bank likely will need to ratchet up interest rates further with inflation “still too high.”
Finally, San Francisco Fed President Mary Daly said that the Fed had held interest rates steady to collect more data and see if more tightening was required.
