US stocks ended sharply lower on Friday, with the Dow and S&P 500 posting their worst weekly performances in months, after St Louis Federal Reserve President James Bullard said that the US central bank might raise interest rates sooner than previously expected, spooking investors.
The blue-chip Dow and the benchmark S&P 500 started the week at record closing levels, but the Dow dropped 3.45 percent and the S&P 500 lost 1.91 percent — their worst decline in any week since late October last year and late February respectively.
The tech-heavy NASDAQ slid 0.28 percent, despite posting its two highest finishes in the past five days.
Investor confidence in their existing positions was initially dinged by the Fed’s policy meeting, where it projected interest rate hikes would happen sooner than anticipated, and signaled it was reaching the point where it could begin talking about tapering its massive stimulus — as opposed to just thinking about it.
This was compounded by Bullard on Friday saying that he was among the seven officials who saw rate increases beginning next year to contain inflation.
Inflation, and how the US central bank plans to tackle it as the country comes out of the COVID-19 pandemic, had been front-and-center of investors’ minds in the run-up to the policy meeting, which ended on Wednesday.
Photo: Bloomberg
“I’m not surprised to see the market sell off a little bit. I’m never surprised, given the strong run we’ve had for such a long period of time, when you see some periods of profit-taking,” said Tim Ghriskey, chief investment strategist at Inverness Counsel Inc in New York.
The CBOE volatility index, Wall Street’s fear gauge, on Friday closed at a four-week high.
“Next week, you will have various Fed governors give speeches, and we’ll have the same thing: Some governors will be more hawkish, and some will be more dovish, so you’ll see some back-and-forth,” Ghriskey added.
On Friday, the Dow Jones Industrial Average fell 533.37 points, or 1.58 percent, to 33,290.08, the S&P 500 lost 55.41 points, or 1.31 percent, to 4,166.45 and the NASDAQ Composite dropped 130.97 points, or 0.92 percent, to 14,030.38.
The upward move in commodities did not translate into positive sentiment for US energy stocks, with the sector’s index the worst performer on the day. The utilities and financials indices also fell by more than 2 percent.
Friday was also “quadruple witching day,” the quarterly simultaneous expiration of US options and futures contracts. It was the largest options expiration in history, Charles Schwab vice president of trading and derivatives Corp Randy Frederick said.
Volume on US exchanges was 14.97 billion shares, compared with the 10.96 billion average over the past 20 trading days.
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