Wall Street’s main indexes fell on Friday, extending declines to the fourth session on a drag from megacap growth stocks, as evidence of a resilient US economy fanned fears of interest rates staying higher for longer.
The three main US stock indexes are on track for sharp weekly losses as a spate of strong economic data, including a fall in weekly jobless claims, caused investors to dial back expectations of rate cuts and drove up government bond yields.
The yield on the 10-year Treasury note hit a ten-month high of 4.328 per cent in the previous session and came within a whisker of its highest level since 2007.
“The drivers really have been of late the rising Treasury yields and that is signalling a more risk-off investor sentiment,” said Art Hogan, chief market strategist at B Riley Wealth.
“Investors are looking at (better-than-expected economic data) and saying the Fed likely isn’t restrictive enough yet.”
Traders see a nearly 91 per cent chance of the Fed holding rates at current levels at its September meeting, according to the CME Group’s FedWatch tool.
On Friday, rate-sensitive big technology and growth stocks such as Apple, Microsoft, Tesla and Nvidia slipped between 0.7 per cent and 2.8 per cent even as Treasury yields took a breather.
The communication services and technology sectors housing major growth stocks fell 1.6 per cent and 1.0 per cent respectively.
The tech-heavy Nasdaq hit an over two-month low and is set to post the biggest weekly declines of the three major indices, down 3 per cent so far.
The CBOE volatility index hit its highest in nearly three months, reflecting rising investor anxiety.
Risk sentiment has also been hurt in recent days by China’s sluggish economic recovery and growing concerns about its property market. US-listed shares of Chinese companies JD.Com and Alibaba Group fell 5.1 per cent and 3.5 per cent, respectively.
Among major movers of the day, Estee Lauder lost 3.2 per cent after the cosmetics maker forecast its annual net sales and profit below Street estimates.
Applied Materials rose 1.5 per cent after the chip equipment maker forecast fourth-quarter profit above analysts’ estimates.
With no major economic data due on Friday, focus will now shift to Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole economic symposium next week as well as earnings from chip designer Nvidia.
In early trade on Friday, the Dow Jones Industrial Average was down 45.21 points, or 0.13 per cent, at 34,429.62, the S&P 500 was down 18.06 points, or 0.41 per cent, at 4,352.30, and the Nasdaq Composite was down 118.29 points, or 0.89 per cent, at 13,198.64.
Hawaiian Electric shares jumped 6.6 per cent after the utility firm sought expert advice amid growing scrutiny over its role in the Maui wildfires, but said that its goal was not to restructure the company.
Shares of cryptocurrency firms such as Coinbase Global, Bitfarms and Riot Platforms Inc fell between 2 per cent and 5.5 per cent as bitcoin hit a fresh two-month low.
Declining issues outnumbered advancers for a 1.08-to-1 ratio on the NYSE and for a 1.00-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and 17 new lows, while the Nasdaq recorded 10 new highs and 146 new lows.