Wall Street’s Weekly Winning Streak Snapped as Fed Concerns Lead to Decline
Wall Street
Dow Jones Industrial Average experienced a decline of 219.28 points, equivalent to a decrease of 0.65%. As a result, the index closed at 33,727.43 points.
Similarly, the S&P 500 index faced a loss of 33.56 points, indicating a decline of 0.77%. Its closing value stood at 4,348.33 points. Additionally, the Nasdaq Composite index saw a significant drop of 138.09 points, equivalent to a decrease of 1.01%. It concluded the trading session at 13,492.52 points.
On Friday, the U.S. stock market experienced a general decline as all three major indexes recorded losses.
The week was primarily dominated by Federal Reserve Chairman Jerome Powell’s testimony, during which he indicated the possibility of future interest rate hikes while assuring a cautious approach by the central bank.
The broad sell-off impacted the entire market, with the Nasdaq composite index, which is heavily influenced by technology-related stocks, particularly affected.
Among the interest-sensitive megacap stocks, companies like Microsoft Corp, Tesla Inc, and Nvidia Corp contributed significantly to the downward pressure on the Nasdaq index.
Throughout the week, aside from Powell’s congressional testimony, there were limited market-moving catalysts, resulting in weekly losses for all three major indexes.
This concluded a weeks-long rally that had previously propelled the market upward.
The Nasdaq index concluded its eight-week winning streak, marking its longest stretch of consecutive weekly gains since March 2019. Similarly, the S&P 500 index ended its five-week rally, representing its longest uninterrupted period of weekly gains since November 2021.
Both the S&P 500 and the Nasdaq experienced significant declines in percentage terms from Friday to Friday, recording their most substantial drops since the early days of March, when the regional banking liquidity crisis had an impact.
Ross Mayfield, an investment strategy analyst at Baird in Louisville, Kentucky, observed that the market had been overbought, and the recent decline can be seen as a correction.
He noted that the rally had been driven by momentum, with broad participation across various sectors. Mayfield also highlighted that market pauses are not surprising and that the current pause has been relatively orderly in its execution.
In an interview with Reuters on Friday, Mary Daly, the President of the San Francisco Fed Bank, expressed her belief that projecting two additional rate hikes for the remainder of the year is a “very reasonable” projection.
Her statement aligned with the stance conveyed by Federal Reserve Chairman Jerome Powell, emphasizing the importance of exercising caution in making policy decisions.
Furthermore, Tom Barkin, the President of the Atlanta Fed, stated late on Thursday that he remained unconvinced that inflation was on a consistent trajectory towards the central bank’s 2% target.
Barkin expressed skepticism regarding the sustainability of inflation’s downward path. However, he refrained from making any predictions about the outcome of the Federal Reserve’s policy meeting scheduled for July. Barkin’s cautious approach indicates that he is waiting for more information and analysis before making any definitive statements or forecasts regarding the central bank’s future policy decisions.
According to CME’s FedWatch tool, financial markets have priced in a 74.4% probability of the Federal Reserve resuming the hiking of the Fed funds target rate by an additional 25 basis points at the upcoming July meeting.
This suggests that market participants are anticipating a rate hike in the near term. However, there is skepticism surrounding the potential for a second rate hike.
Ross Mayfield, the investment strategy analyst at Baird in Louisville, Kentucky, expressed doubts regarding the market’s confidence in a second rate hike.
Mayfield suggested that while a rate hike in July seems probable, the data on inflation and other economic indicators may not justify another rate hike by the time the September Fed meeting arrives.
In terms of market performance, the Dow Jones Industrial Average experienced a decline of 219.28 points, equal to a decrease of 0.65%, closing at 33,727.43. Similarly, the S&P 500 index recorded a loss of 33.56 points, representing a decline of 0.77%, with a closing value of 4,348.33.
The Nasdaq Composite index saw a significant drop of 138.09 points, equivalent to a decrease of 1.01%, concluding the trading session at 13,492.52.
During the observed period, all 11 major sectors of the S&P 500 index experienced declines, with utilities being the sector that suffered the most significant percentage loss.
The decline in technology shares was influenced by the performance of chip companies, as evidenced by the 1.8% slide in the Philadelphia SE Semiconductor index.
On a positive note, used car marketplace Carmax Inc reported quarterly profits that surpassed expectations, leading to a notable surge of 10.1% in its share price.
However, Starbucks Corp faced a decline of 2.5% following an announcement by its unions. Approximately 3,500 workers in the United States stated their intention to strike the following week in protest against the chain’s decision to ban Pride month decorations at its cafes.
The announcement generated negative sentiment among investors and impacted the company’s stock performance.
The CBOE Market Volatility index, also known as the VIX, which serves as a measure of investor anxiety, settled with an increase of 0.53 points at 13.44.
This bounce came after reaching a 3-1/2 year low, indicating a slight uptick in market volatility and investor concern.
On the New York Stock Exchange (NYSE), declining issues outnumbered advancers by a ratio of 2.39-to-1, reflecting a higher prevalence of declining stocks. Similarly, on the Nasdaq exchange, decliners outweighed advancers with a ratio of 2.03-to-1.
Regarding the number of new highs and lows, the S&P 500 index recorded 18 new 52-week highs alongside four new lows. Meanwhile, the Nasdaq Composite index registered 35 new highs but also experienced a significant number of new lows with 138.
During this period, the Russell 2000 index finalized the reconstitution of its stock components. This process likely led to increased trading volume as investors adjusted their portfolios to reflect the updated index composition.
Overall, the volume of shares traded on U.S. exchanges amounted to 15.93 billion shares, surpassing the 11.68 billion average for a full trading session over the last 20 trading days.
The higher-than-average volume indicates increased market activity and investor participation during the observed period.
