© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, June 22, 2023. REUTERS/Brendan McDiarmid
Written by Stephen Kolb
NEW YORK (Reuters) – U.S. stocks fell broadly on Friday, capping a week dominated by testimony from U.S. Federal Reserve Chairman Jerome Powell, in which he signaled more interest rate hikes but pledged that the central bank would proceed with caution.
All three major US stock indices were in the red but well off their session lows. Interest-sensitive large-cap stocks were the biggest drag on the tech-heavy index, led by Microsoft Corporation (NASDAQ:) Nvidia (NASDAQ:) Corp. Tesla (NASDAQ:) Inc.
With a lack of catalysts affecting the market this week aside from Powell’s congressional testimony, the three indices are set to post weekly losses, closing the book on a weeks-long rally.
The Nasdaq had set course to snap its eight-week winning streak, the longest since March 2019, while it looked set to break its five-week rally, its longest since November 2021.
The S&P 500 was on track to post its biggest Friday-to-Friday percentage decline since early March, when a regional bank liquidity crunch hit.
“What we’re seeing today is a flight to safety,” said Greg Pasuk, CEO of AXS Investments in New York. “Investors are certainly showing renewed fears of a US recession, inflation and Fed policy remains an investor story.”
San Francisco Fed President Mary Daley said in an interview with Reuters that two more rate hikes this year is a “very reasonable” expectation, while reiterating Chairman Powell’s call for greater caution in policy decisions.
Atlanta Fed Chairman Tom Barkin said late Thursday that he’s not convinced inflation is on a steady path toward the 2% target, but added that he wouldn’t predict the outcome of the central bank’s policy meeting in July.
Financial markets had a 74.4% chance that the Fed will resume raising the federal funds target rate by another 25 basis points at the July meeting, according to CME’s FedWatch tool.
“The change from economists’ view that the Fed’s rate hike is over to now pointing to one or more rate hikes this year has investors concerned that we may be heading for a hard landing and possibly a recession later this year,” Pasuk added.
At 2:27 PM EST, the index fell 183.44 points, or 0.54%, to 33,763.27, the S&P 500 lost 26.47 points, or 0.60%, at 4,355.42, and the Nasdaq Composite fell 99.48 points, or 0.73%, to 13,531.13.
All 11 major sectors of the S&P 500 were in negative territory, with utilities suffering the largest percentage of losses.
The chips weighed on technology stocks, which fell 1.5%.
Carmax Inc., the used car marketplace, posted better-than-expected quarterly earnings, sending its shares up 9.4%.
Starbucks Corporation (NASDAQ:) fell 2.7% after unions said about 3,500 American workers will strike next week to protest the chain’s ban on Pride Month decorations in its cafes.
It is expected to finish reconstituting its stock components after the closing bell, which tends to cause an increase in trading volume as the session draws to a close.
Declining issues outnumbered NYSE takers 2.02 to 1; On the Nasdaq, the ratio was 2.04 to 1 in favor of declining stocks.
The S&P 500 hit a new 52-week high and four new lows; The Nasdaq index posted 32 new highs and 112 new lows.
