Stocks End Jittery Weekly Lower as Fed Hawks Circle : Markets Wrap

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(Bloomberg) — US stocks suffered their longest weekly losing streak since September, with investors concerned that the Federal Reserve’s resolve to keep raising rates could tip the economy into a recession.

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The S&P 500 and the tech-heavy Nasdaq 100 closed the session lower for a third day. Friday’s market movements were boosted by the quarterly triple witching expiration equity derivatives.

US Treasuries were mixed with short-term bonds rallying Friday. The two-year yield on policy-sensitive bonds ended the week 19 basis points lower that where it began. The dollar did not change much during the week. Oil posted a weekly gain.

Investors were happy to see the earlier this week, softer-than expected inflation data. But that euphoria faded as Fed officials hammered home the message that rates will go higher for longer until they’re confident inflation has been subdued. Although the Fed raised rates by 50 basis point on Wednesday, risk assets were on the decline since policymakers indicated a peak rate higher than the market expected. The sentiment was further eroded by a series of rate hikes and hawkish outlooks coming from central banks all over the globe, including from the European Central Bank.

Continue reading: Stock Timers who ponied up $25 Billion get Yet Another Thrashing

Traders were also faced with the flurry US data this week, which showed that the economy is cooling while the labor market remains strong. The Fed’s main goal is to soften the labor market.

“The market has been in a tug-of-war between better-than-feared economic data juxtaposed with concerns about the potential for the Fed to over-tighten monetary policy and push the economy into a recession,” said Art Hogan, chief market strategist at B. Riley Wealth. “That tug-of-war will likely continue in the first quarter of 2023 unless and until the Fed gets to their terminal Fed Funds rate.”

Here are some of the major moves on markets:

Stocks

  • The S&P 500 fell 1.1% as of 4 p.m. New York time

  • The Nasdaq 100 declined 0.9%

  • The Dow Jones Industrial Average declined 0.9%

  • The MSCI World index dropped 2.4%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%

  • The euro fell 0.3% at $1.0594

  • The British pound fell 0.1% and was now $1.2162

  • The Japanese yen rose 0.8% and reached 136.66 USD

Cryptocurrencies

  • Bitcoin fell 3%, to $16,884.02

  • Ether dropped 4.7% to $1.204.88

Bonds

  • The yield on 10-year Treasuries rose four basis points to 3.488%

  • Germany’s 10-year yield advanced seven basis points to 2.15%

  • Britain’s 10-year yield advanced nine basis points to 3.33%

Commodities

  • West Texas Intermediate crude oil fell 2.4%, to $74.30 per barrel

  • Gold futures rose 0.8%, to $1802.70 an ounce

Bloomberg Automation assisted in the production of this story.

— With the assistance of Srinivasan Sivabalan, John McCorry.

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©2022 Bloomberg L.P.

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