Spencer Platt
US stocks had stumbled in an uncertain trading session so far on Friday, as concerns about the Federal Reserve’s path to future rate hikes weighed on sentiment.
In the late afternoon, the high-tech Nasdaq Composite (COMP.IND) was the worst performer among the three main indices, falling 1.21% to 11,711.95 points.
The benchmark S&P 500 (SP500) index was lower by 0.75% to 4,059.82 points, while the Dow Jones (DJI) was down 0.06% to 33,675.86 points. Losses in the blue-chip index were capped in part by a jump in Amgen (AMGN) shares.
Of the S&P’s 11 sectors, seven were trading in the red, with energy down nearly 4%. Defensive Utilities and Consumer Staples sectors led the winners.
US stocks have seen a lot of choppiness this week and have limped through volatile trading sessions, triggered mainly by higher than expected inflation reports in both consumer and producer prices. Aggressive comments from Fed speakers on Thursday and today have also added to the gloomy atmosphere.
Cleveland Fed President Loretta Mester said Thursday she made a “compelling case” for a 50 basis point rate hike at the central bank’s monetary policy committee meeting earlier this month. In addition, St. Louis Fed President James Bullard said Thursday that he could not rule out a 50 basis point rate hike at the Fed’s March meeting.
Earlier today, Richmond Fed President Thomas Barkin, at a CME Group event, said he was not yet “ready to declare victory over inflation” and was in favor of 25 basis point hikes in the future. , as that allowed flexibility in responding to incoming economic data. .
“Markets took a hit in the last 24 hours, with rates rising and stocks selling on strong inflation data and hawkish central bank rhetoric, as some Fed officials even raised the possibility that could resume 50bp hikes… we have seen a significant change in the market narrative since the jobs report, with much stronger than expected numbers on inflation and the economy, raising the possibility that the Fed keep raising rates for some time,” said Henry Allen of Deutsche Bank.
According to the CME FedWatch tool, markets are now pricing in an 81.9% chance of a 25 basis point hike at the Fed’s March meeting, up from more than 90% earlier this week. Meanwhile, the probability of a 50 basis point hike has risen to 18.1%.
In another bearish warning from a big name, Goldman Sachs now expects three more Fed rate hikes this year after January’s producer price index came in stronger than expected.
The economic calendar was somewhat busy on Thursday. The data showed an unexpected increase in export prices in January, while import prices fell.
Additionally, US e-commerce retail sales for the fourth quarter fell 0.1% qoq. Additionally, leading indicators for January fell as much as expected, while revenue from selected services rose 1.6% in the fourth quarter.
As for the fixed income markets, returns were mixed. The 10-year Treasury yield (US10Y) was down 1 basis point to 3.83%, while the 2-year yield (US2Y) was up 1 basis point to 4.63%.
Among active stocks, Albemarle (ALB) was the top percentage loser in the S&P 500 (SP500) after posting a significant gain in the previous session in its quarterly results. By contrast, farm equipment giant Deere (DE) was the S&P’s top percentage gainer after its earnings beat estimates.
DraftKings (DKNG) rose after its financial report.
