Wall Street closes lower, breaks weekly winning streak on Fed concerns

By Stephen Culp

NEW YORK (Reuters) – U.S. stocks closed lower on Friday, capping a week dominated by testimony from Federal Reserve Chairman Jerome Powell in which he signaled more interest rate hikes ahead but promised that the central bank would act cautiously.

All three major US stock indices lost ground in a broad sell-off. Interest-sensitive mega-cap stocks weighed the most in the tech-laden index, led by microsoft corporation (NASDAQ:), Tesla (NASDAQ:) Inc, and Nvidia (NASDAQ:) Corp.

With few catalysts to move the market this week, other than Powell’s testimony in Congress, all three indices posted weekly losses, ending a week-long rally.

The Nasdaq broke its eight-week winning streak, the longest since March 2019, while the Nasdaq broke its five-week rally, the longest since November 2021.

The S&P 500 and Nasdaq posted their biggest Friday-to-Friday percentage drops since early March, when the regional bank liquidity crisis hit.

“It’s been an overbought market and it’s given off a bit,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “(The rally) has been momentum driven, with quite a large turnout, and it’s no surprise that markets are pausing, and the pausing has been pretty orderly.”

Federal Reserve Bank of San Francisco President Mary Daly said in an interview with Reuters on Friday that two more rate hikes this year are a “very reasonable” projection, while echoing Powell’s call for greater caution in political decisions.

Atlanta Fed President Tom Barkin said late Thursday that he was not convinced inflation is on a steady path toward the 2% target, but added that he would not predict the outcome of the policy meeting. from the central bank in July.

Financial markets have a 74.4% chance the Fed will raise the Fed funds target rate again by another 25 basis points at the July meeting, according to CME’s FedWatch tool.

“You can probably count on a rate hike next month, but it’s that second hike that markets are skeptical of,” Mayfield added. “I’d be surprised if the inflation data and other economic data warrant that second hike by the time we get to the September[Fed]meeting.”

It fell 219.28 points, or 0.65%, to 33,727.43, the S&P 500 lost 33.56 points, or 0.77%, to 4,348.33 and the Nasdaq Composite fell 138.09 points, or a 1.01%, to 13,492.52.

All 11 major sectors of the S&P 500 lost ground, with utilities suffering the biggest percentage loss.

Chips weighed on tech stocks, down 1.8%.

Used car market Carmax Inc posted better-than-expected quarterly earnings, sending its shares up 10.1%.

starbucks corporation (NASDAQ:) fell 2.5% after its unions said about 3,500 American workers will go on strike next week to protest the chain’s ban on Pride decorations in their cafes.

The CBOE Market Volatility Index, a gauge of investor anxiety, rose 0.53 points to 13.44, rebounding from a 3-1/2-year low.

Down issues outnumbered those up on the New York Stock Exchange by a ratio of 2.39 to 1; on Nasdaq, a 2.03-to-1 ratio favored decliners.

The S&P 500 posted 18 new 52-week highs and four new lows; the Nasdaq Composite posted 35 new highs and 138 new lows.

The reconstitution of its stock market components was completed, which prompted an increase in trading volume.

Volume on US exchanges was 15.93 billion shares, compared with an average of 11.68 billion for the full session over the past 20 trading days.