4:05pm: Four-week winning streak over
US stocks ended a four-week winning streak on Friday, with the three major indices closing lower in a turnaround from the previous weeks.
At the close, the Nasdaq was down 2% at 12,705 points, while the benchmark S&P 500 lost 1.3%. at 4,228 and the Dow fell 0.9% to close at 33,707.
12.05pm: Dollar riding high
The major US indices were trading in the red midday, as investor sentiment cooled as recession talk thrives and the US Federal Reserve persists in its struggle against inflation.
At midday, the Dow Jones Industrial Average was down 0.9% to 33,703, the S&P 500 was down by 1.3% at 4,228, and the Nasdaq Composite was down by 2% at 12,706.
Michael Hewson, chief market analyst at CMC Markets UK, said concerns about the global economic outlook prompt profit taking after several weeks of gains.
“There still seems to be a great deal of uncertainty about the prospect of a Fed pivot and whether we’ll see one in the next few months. Given that we have Jackson Hole next week, and US policymakers have leant to the hawkish side in comments made this week, we could be starting to see some evidence of risk being taken off the table,” Hewson said.
The US dollar has swept all before it this week with strong gains across the board, as currency markets start to price in the prospect the Federal Reserve is unlikely to soft pedal when it comes to raising rates heading into the end of the year, according to Hewson.
“This message doesn’t appear to be cutting through when it comes to equity markets, but at some point, it will, probably at Jackson Hole next week when Fed chair Jay Powell gives his keynote speech,” he said. “In the meantime, the US dollar is benefitting from the fact it has more headroom to raise rates than its peers, given its economy is in better shape than most of its peers.”
At midday, the major movers included shoe and apparel retailer Footlocker, up 22% on beating analyst estimates on quarterly earnings. Also up were Davita by 4.5% and Johnson and Johnson by 1.5%
On the downside, Deere slid 5.2% after missing quarterly earnings estimates despite higher than expected sales, Etsy (NASDAQ:ETSY) fell 7% and Boeing dropped 3.2%.
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9.35am: Fed comments put stocks under pressure
US stocks opened in the red as investor attention has returned to almost certain continued interest rate hikes on the horizon following the more hawkish than expected Fed minutes released Wednesday.
Just after the open, the Dow Jones Industrial Average had slipped 208 points or 0.6% at 33,792 points. The S&P 500 was down 28 points or 0.7% at 4,256 points, and the Nasdaq Composite was down 123 points or 1% at 12,842 points.
Meme stock Bed Bath & Beyond Inc had plummeted about 40% at the open after activist investor Ryan Cohen on Thursday revealed he had exited his 11.8% stake in the business.
As the cryptocurrency crash continues, Bitcoin USD sunk about 8.4%, trading at about $21,532 – the lowest level reached since July.
Apple Inc (NASDAQ:AAPL) wobbled, down about 0.3% at the open, after the company alerted consumers to security flaws affecting its iPhones and iPads.
6:30am: Rates in focus
US stocks were expected to open lower on Friday with the focus returning to concerns highlighted by the minutes of the US Federal Reserve's last rate-setting meeting which indicated that the fight against inflation has yet to be won.
Futures for the Dow Jones Industrial Average were trading 0.6% lower pre-market, while those for the broader S&P 500 index were down 0.8%, and contracts for the tech-laden Nasdaq-100 lost 0.9%.
The minutes, released on Wednesday, came in more hawkish than expected weighing on stocks and since then economic data from the world’s biggest economy has come in mixed.
“The Federal Reserve minutes released this Wednesday showed that the US will continue raising the rates and tightening the monetary conditions to bring inflation back toward the 2% level in the US,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
In the wake of the softer-than-predicted headline inflation number last week, investors had scaled back their expectations for future rate hikes, but the Fed minutes have since forced investors to rethink those expectations. After all, inflation still remains at decades-high levels and there is no certainty it has peaked in this cycle, added Ozkardeskaya.
“The latest data showed that the existing home sales declined in the US, but the Philly Fed manufacturing index came (in) unexpectedly stronger. Jobless claims also fell more than expected last week, defying those calling for recession in the US,” she concluded.
Meanwhile, Federal Reserve Bank of St Louis President James Bullard was on record on Thursday as saying he may be in favor of another big rate hike when rate-setters meet next month as inflation may not have peaked just yet.
Elsewhere, European Central Bank board member Isabel Schnabel noted that the eurozone inflation outlook has also failed to improve since the ECB’s rate hike in July and that she will favor another large interest rate hike next month, even as recession risks harden. Her remarks highlight the dilemma faced by rate-setters across the world.
Contact the author at jon.hopkins@proactiveinvestors.com