Stocks capped a week of volatile trading on Wall Street with a large selloff on Friday that left the major indexes with their second consecutive weekly loss.
The selling lost some momentum in the afternoon, but intensified again in the final hour of trading. The S&P 500 and the Dow Jones Industrial Average each fell 0.7%. The Nasdaq composite bore the brunt of the selloff, however, losing 1.2%.
Treasury yields fell as investors shifted money to the safety of US bonds. The 10-year Treasury yield, which affects rates on mortgages and other consumer loans, fell to 1.93% from 1.97%.
Markets have been choppy all week as investors watch the latest developments in Ukraine, where Russia has amassed troops on the border. Tensions are another concern for investors as they try to determine how the economy will react to rising inflation and impending interest rate hikes.
“Investors are facing geopolitical risks, Fed tightening and valuation spikes,” said Peter Essele, head of portfolio management for Commonwealth Financial Network. “Any time you get that kind of trifecta scenario, you’re going to see volatility.”
And then there’s the uncertainty about what might happen in Ukraine over this holiday weekend, with US markets set to close on President’s Day on Monday.
“You’re heading into a long weekend with no resolution on Russia or Ukraine, so you’ve got people just going a little sideways,” said Tom Hainlin, national investment strategist at US Bank Wealth Management. .
The S&P 500 fell 31.39 points to 4,348.87. The benchmark index is now 9.3% below its all-time high set on January 3.
The Dow fell 232.85 points to 34,079.18 and the Nasdaq fell 168.65 points to 13,548.07. Shares of smaller companies also fell, sending the Russell 2000 Index down 18.76 points, or 0.9%, to 2,009.33.
Tensions over Russia and Ukraine escalated throughout the week, throwing a snowball as markets focused more on inflation, central bank monetary policy and economic growth. The United States has issued some of its clearest and most detailed warnings yet of how a Russian invasion of Ukraine might unfold, and its Western allies have been on high alert for any attempt by the Kremlin to create a false pretext for a new war in Europe.
Russia is a major energy producer and military conflict could disrupt energy supplies and make energy prices extremely volatile.
Inflation remains a top concern for Wall Street as companies continue to grapple with supply chain issues and higher costs, prompting warnings that operations will suffer for part or all of 2022 General Electric fell 5.9% after warning that inflation pressure and supply chain issues hurt several of its businesses, including healthcare, renewable energy and aviation. He expects the problems to persist for at least the first half of the year.
Video streaming company Roku fell 22.3% after giving investors a weak revenue forecast and warning of ongoing supply chain issues.
Weakness in several large tech stocks, which carry more weight on indexes due to their size, helped drag the market down overall. Intel fell 5.3%.
Retailers and travel-related businesses also lost ground. Amazon lost 1.3% and Royal Caribbean fell 1.7%
Companies considered less risky investments, such as utilities, held up better than the rest of the market.
Investors remain focused on the Federal Reserve and its plan to hike interest rates to combat rising inflation. The final minutes of a meeting of Fed policymakers confirmed that the central bank intends to act decisively to fight inflation with higher interest rates. Wall Street is trying to look ahead to determine how more aggressive Fed monetary policy will impact markets, especially after years of more supportive ultra-low interest rate policies.
New York Federal Reserve Chairman John Williams said on Friday that the central bank should start raising interest rates next month to help contain too-high inflation. But he added that rate hikes may not have to start as strong as some have suggested.
“I personally don’t see any compelling case for taking a big step early,” Williams said following an event at New Jersey City University to discuss the economy and interest rates.
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