US stocks fell sharply on Friday as investors continued to weigh hawkish comments from Federal Reserve Chair Jerome Powell a day earlier and a fresh set of corporate earnings that largely disappointed.
How are stocks traded?
The Dow Jones Industrial Average DJIA, -1.88%, fell 879 points, or 2.5%, to 33,914.
The S&P 500 SPX, -1.83%, fell 107 points, or 2.4%, to 4,286 and was on course for a third straight weekly decline.
The Nasdaq Composite COMP, -1.61%, lost 298 points or 2.3% to trade at 12,875.
On Thursday, the Dow lost 368.03 points, or 1.1%, reversing a gain of as much as 331.43 points in intraday trade. The intraday swing of more than 700 points was the largest since March 8, according to Dow Jones Market Data. The S&P 500 fell 1.5% while the Nasdaq Composite fell 2.1%.
What moves the market?
Stock market weakness picked up on Friday where Thursday’s sell-off ended as stocks tumbled into the afternoon after Powell added his support for a faster rate hike to cool inflation, measures that would include a possible 50 basis point rate hike in May .
“It seems investors have been overly complacent about what is to come [Fed] Meeting that needs to change,” Michael Kramer, founder of Mott Capital, said in a note.
The Cboe Volatility Index VIX, +19.62%, an options-based measure of expected volatility over the next 30 days, was too low ahead of the May 3-4 Federal Open Market Committee (FOMC) meeting, said Kramer. It rose on Thursday and rose another 19.5% to 27.1 on Friday — hovering above its long-term average just below 20.
Powell’s comments appeared to make a half a percentage point rate hike the base case, with the central bank also likely to announce the start of its balance sheet run-off, Kramer said.
Meanwhile, traders in fed funds futures have priced in a 94% chance that the Federal Reserve will hike 75 basis points in June, up from 70% on Thursday and 28% a week ago, according to the CME FedWatch Tool.
Meanwhile, benchmark 10-year government bond yield TMUBMUSD10Y, 2.895%, eased slightly to around 2.89% after rising about 8.1 basis points to 2.917% on Thursday, its highest level since Dec. 4, 2018 .
Read: How to invest as inflation, higher interest rates and war turmoil hit the markets
And some warn that the Nasdaq looks particularly vulnerable. The week delivered some big earnings news for the tech sector, with investors cheering Thursday’s Tesla TSLA results, +0.60%, followed by deeply disappointing Netflix NFLX results, -0.53%.
The Fed’s hawkish stance and the inexorable rise in Treasury yields could undermine the former appeal of equities, previously seen as the only viable option for many income investors.
“Investors seem to be moving away from the TINA (There is no Alternative) narrative when it comes to equities lately,” said Brian Price, head of investment management at the Commonwealth Financial Network, in a statement. “This is the second straight week of significant outflows from equity funds and days like today are unlikely to change sentiment going forward. The only positive takeaway might be that sentiment has turned too bearish and we could see a countertrend rally sometime in the coming weeks.”
In a chart: Investors just pulled a massive $17.5 billion out of global equities. They’re just getting started, says Bank of America.
All 11 major S&P 500 sectors fell on Friday, with healthcare stocks falling the most after a dismal earnings forecast from HCA Healthcare Inc. HCA, -20.58%, dropped its shares. Other hospital operators, including Tenet Healthcare Corp. THC, -13.53%, Community Health Systems Inc. CYH, -17.31%, and Universal Health Services UHS, -12.88% were also down between 10.4% and 13.2%.
However, of the 99 companies in the S&P 500 that reported first-quarter earnings, 77.8% beat market expectations. According to data from Refinitiv, 66% of companies typically beat estimates.
Next week will be another big earnings week with 558 reports from companies, Saxo noted. “This is the great test of companies’ ability to pass costs on to their customers,” they said.
Investors could also be nervous ahead of Sunday’s final round of the French presidential election. An angry victory for far-right candidate Marine Le Pen over incumbent Francois Macron would likely trigger market volatility, analysts said.
See: This is how the markets for the presidential elections on Sunday in France are positioned between Macron and Le Pen
Which companies are in focus?
- HCA Shares fell 19.6%, posting their largest percentage drop since March 16, 2020, when they fell 19.02%, according to Dow Jones Market Data.
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gap inc
Shares of GPS, -18.30% plunged nearly 19% after sales fell more than expected and the retailer announced the departure of Nancy Green, CEO of Old Navy. shares of Qualtrics International Inc.
XM, -8.83%, fell 9.5% after the experience management software company reported first-quarter revenue guidance that beat forecasts.-
snap inc
SNAP, -0.10% Shares shed 0.7% after the social media group reported quarterly sales that fell short of Wall Street’s expectations. shares of American Express Co.
AXP, -1.59%, fell 1.4% after beating earnings expectations on Friday amid an ongoing recovery in travel and strong spending trends among younger consumers.- Verizon Communications Inc. VZ, -5.06% fell after its earnings report showed a net loss of postpaid phone subscribers in the most recent quarter and hailed “competitive dynamics within the industry,” although it said it had its best quarter of net broadband additions in more than a decade .
How are other assets traded?
ICE US Dollar Index DXY is up +0.57%, up 0.7% to its highest level since March 2020.
Bitcoin BTCUSD, -2.16%, fell 2.4% to trade near $39,500.
U.S. oil benchmark CL.1, -1.88%, fell $1.72, or 1.7%, to trade at $102.07 a barrel on the New York Mercantile Exchange, down 4 .1% fell.
Gold GC00, -0.63%, fell $13.90 or 0.7% to settle at $1,934.30 an ounce, down 2.1% weekly.
The Stoxx Europe 600 SXXP, -1.79%, is down 1.5%, while London’s FTSE 100 UKX, -1.39%, is down 1.4%.
Shanghai Composite SHCOMP, +0.23% rose 0.2%, while Hong Kong’s Hang Seng Index HSI, -0.21%, slipped 0.2% and Japan’s Nikkei 225 NIK, -1.63 %, down 1%.