NEW YORK (Reuters) – U.S. stocks closed lower on Friday, capping a week dominated by testimony from Federal Reserve Chairman Jerome Powell in which he signaled more interest rate hikes to come but vowed that the central bank would proceed with caution.
The three major US stock indices lost ground in a broad sell-off. Interest-sensitive big cap stocks fell on the technology-laden Nasdaq Composite (.IXIC), led by Microsoft Corp (MSFT.O), Tesla Inc (TSLA.O) and Nvidia Corp (NVDA.O).
With the lack of catalysts affecting the market this week apart from Powell’s testimony before Congress, the three indices recorded weekly losses, ending a rally that lasted for weeks.
The Nasdaq snapped its eight-week winning streak, the longest since March 2019, while the S&P 500 (.SPX) broke its five-week rally, its longest since November 2021.
The S&P 500 and Nasdaq posted their biggest Friday-to-Friday percentage declines since early March, when a regional bank liquidity crisis hit.
“It was an overbought market, and it went back a little bit,” said Ross Mayfield, an investment strategist at Baird in Louisville, Kentucky. “(The rally) was momentum driven, with fairly broad participation, and there is nothing surprising about the markets pausing, and the pausing was fairly orderly.”
San Francisco Fed President Mary Daley said Friday in an interview with Reuters that two more rate hikes this year is a “very reasonable” expectation, while repeating Powell’s call for more caution in policy decisions.
Atlanta Fed Chairman Tom Barkin said late Thursday that he’s not convinced inflation is on a steady path toward the 2% target, but added that he wouldn’t predict the outcome of the central bank’s policy meeting in July.
Financial markets had a 74.4% probability that the Fed will resume raising the federal funds target rate by another 25 basis points at the July meeting, according to CME’s FedWatch tool.
“You can probably count on a rate hike next month, but it’s this second hike that the markets are questioning,” Mayfield added. “I would be surprised if inflation and other economic data are worth that second hike by the time we get to the September Fed meeting.”
The Dow Jones Industrial Average fell 219.28 points, or 0.65%, to 33,727.43 points, the Standard & Poor’s 500 lost 33.56 points, or 0.77%, to 4,348.33 points, and the Nasdaq Composite Index fell 138.09 points, or 1.01%, to 13,492.52.
All 11 major S&P 500 sectors declined, with utilities (.SPLRCU) suffering the largest percentage loss.
The chips weighed on technology stocks, with Philadelphia SE Semiconductor (.SOX) down 1.8%.
Used-car marketplace Carmax Inc (KMX.N) reported better-than-expected quarterly earnings, sending its shares up 10.1%.
Starbucks Inc (SBUX.O) fell 2.5 percent after its unions said about 3,500 American workers will strike next week to protest the chain’s ban on Pride month decorations in its cafes.
The CBOE Market Volatility Index (.VIX), a measure of investor anxiety, settled down 0.53 points at 13.44, rebounding from a 3-1/2-year low.
Declining issues outnumbered NYSE takers 2.39 to 1; On the Nasdaq, the ratio was 2.03 to 1 in favor of declining stocks.
The S&P 500 hit a new 52-week high and four new lows; The Nasdaq Index posted 35 new highs and 138 new lows.
Russell 2000 finished reconfiguring components of its stock, which increased turnover.
Trading volume on US exchanges reached 15.93 billion shares, compared to an average of 11.68 billion for the full session over the last 20 trading days.
Reporting by Stephen Kolb. Additional reporting by Shubham Batra and Shristi A. Ashar in Bengaluru. Editing by Richard Chang
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