US stocks fell and the sale of government bonds stabilized on Friday, after the last sign that the Federal Reserve will aggressively tighten monetary policy to fight inflation.
The S&P 500 fell 0.3 percent shortly after launch, while the tech Nasdaq Composite fell less than 0.1 percent. The Dow Jones Industrial Average fell 192 points, or 0.5%. On Thursday, major US stock indexes ended in losses.
The sharp rise in government bond yields this week showed signs of stabilizing, with 10-year treasury bond yields hovering at 2.920% in recent trade, their highest level since December 2018 and rising slightly from 2.917% in Thursday. Earlier on Friday, yields made a climb before reversing the course while the session continued. Yields rise when bond prices fall.
Concerns about inflation and the rate of tightening of Federal Reserve money remained at the forefront of investors this week, leading to fluctuations in major stock indices. On Thursday, Fed Chairman Jerome Powell gave a clear signal to investors that the central bank is ready to tighten monetary policy more quickly and said it was likely to raise interest rates by half a percentage point at its meeting in May.
The interest rate hike next month, following the Fed’s quarterly increase in March, will be the first time since 2006 that the central bank raised its interest rate in successive meetings.
Mr Powell’s comments injected new volatility into the fragile stock market, which was shattered this year by the war in Ukraine, rising inflation and rising Covid-19 cases in China. Many traders are now worried that the Fed’s tightening cycle could drive the economy into recession as consumers already feel uneasy about the economy. Next week, investors will analyze new data from the University of Michigan on consumer sentiment in April.
Federal Reserve Chairman Jerome Powell said Thursday that the central bank is likely to raise interest rates by half a percentage point at its May meeting. Photo: Samuel Corum / Getty Images
On Friday, data from the National Statistics Office in the United Kingdom showed signs of consumer nervousness. Retail sales in the UK fell sharply last month, falling 1.4%. This led to a fall of the British pound by 1.1% against the dollar to its lowest level since 2020. The London Stock Exchange FTSE 100 fell 0.7%.
“I think what you’re seeing is that consumers are getting much more hesitant,” said Susanna Streetter, a senior investment and market analyst at Hargreaves Lansdown. “This is a complex rope that central bank politicians need to step on right now. They need to put a lid on this boiling pot of inflation, but they don’t want the steam to be completely expelled from the economy. “
However, for now, investors are encouraged by the strong profits for the first quarter. Of the companies that have reported so far, nearly 80% have exceeded analysts’ expectations. This helped ensure some stability in the US stock market. Even with Thursday’s losses, the Dow Jones Industrial Average is currently at a pace to end the week with a 1% gain.
Shares of airlines rose. United Airlines Holdings added 2.2% and American Airlines Group won 2.7%. On Thursday, American said its sales reached a record high in March, the first month since the pandemic began, in which the airline’s total revenue exceeded 2019 levels. United said it had managed to pass on rising fuel prices to consumers.
Shares of American Express fell 0.6 percent after the credit card company reported net profit for the first quarter of $ 2.10 billion, down $ 2.24 billion a year earlier, even when travel expenses and entertainment has grown.
Kimberly-Clark jumped 8.4 percent after diaper maker Huggies and toilet paper maker Cottonelle raised its sales growth forecast for 2022 and said first-quarter sales were up from the previous year.
Shares of HCA Healthcare fell about 11% after the hospital chain cut its guidelines for the year. The company said that the volume and revenues for the first quarter were offset by higher-than-expected inflationary pressures on labor costs.
Shares on Wall Street fell on Thursday after Federal Reserve Chairman Jerome Powell signaled that the central bank would raise interest rates by half a percentage point at its next meeting.
Photo: Courtney Crow / Associated Press
In raw materials, crude Brent, the international benchmark for oil, fell 1.7% to $ 106.11 a barrel.
In the foreign exchange markets, the ICE US Dollar index, which tracks the currency against a basket of others, rose 0.3%, gaining the week’s profit. Including Friday, the index rose for all but two sessions in April, thanks to geopolitical concerns and the impending rise in interest rates from the Fed.
In overseas markets, the pan-continental Stoxx Europe 600 fell 1.3 percent, driven by technology companies, including German software companies SAP and TeamViewer, which fell 3.4 percent and 3.8 percent, respectively. In contrast, Swiss cement maker Holcim rose 4.8 percent after the company saw sales growth and improved its outlook for the year.
In Asia, Hong Kong’s Hang Seng lost 0.2 percent and Japan’s Nikkei 225 fell 1.6 percent. Shanghai Composite, by contrast, reversed the trend, rising 0.2%.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com
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