U.S. stocks slipped Friday, extending their losses after one of Wall Street’s worst selloffs since the pandemic began.
The Dow Jones Industrial Average lost 202 points, or 0.6%, after slumping more than 1,000 points Thursday, its worst day since 2020. The S&P 500 shed 0.6%, while the technology-heavy Nasdaq Composite lost 1%.
Stocks have swung wildly in recent sessions as investors have tried to gauge what impact the Federal Reserve’s plan to raise interest rates will have on the economy. They are caught between competing hopes: that rate increases will be significant enough to tame rapidly rising inflation, but not so large that they will derail economic growth.
“The market is trying to balance whether central banks are more worried about inflation or about dampening growth and the market has clearly decided they are more worried about inflation,” said Altaf Kassam, head of investment strategy for Europe, the Middle East and Africa at State Street Global Advisors. “If the Fed is going to be fighting inflation at all costs, then it will certainly have an impact on stocks.”
Investors are grappling with an extended selloff that bears little resemblance to the historically short and severe stock-market crash of March 2020. Adding to the pain for many investors: Stocks and bonds have recorded big, simultaneous losses.
In bond markets, the yield on the benchmark 10-year U.S. Treasury note rose to 3.1% from 3.066% on Thursday, which marked its highest level since November 2018. Bond yields rise as prices fall.
At times this week, people appeared to be selling everything, said Danny Kirsch, head of options at Piper Sandler. It’s a “go to cash,” mentality, Mr. Kirsch said. “Nothing’s working.”
Yet despite the recent dramatic one-day swings in the stock market, the major indexes are on track to end the week roughly where they began. The S&P 500 is poised for a decline of less than 0.1%, while the Dow and Nasdaq are off 0.4% and 0.9%, respectively.
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At times in recent weeks, investors have stepped back in to pick up stocks at a discount, helping stabilize the market. But the gains so far have been short-lived, and the indexes have continued to trade near their lows of the year.
The S&P 500 has fallen 13% in 2022; the Dow is off 9.6%; and the Nasdaq has lost 22%.
“Investors, in some ways, may have forgotten what corrections felt like,” said Mike Bailey, director of research at FBB Capital Partners. “Some of them may just want out.”
Stocks rallied Wednesday after the Federal Reserve raised interest rates by half a percentage point, buoyed by relief that it wasn’t actively considering even larger increases in the future, but that relief faded Thursday as investors reassessed the outlook for stocks, leading to a punishing selloff that caught many investors off guard.
The volatility continued early Friday. The latest jobs report showed that the U.S. economy added 428,000 jobs in April and that the unemployment rate remained unchanged at 3.6%. Economists surveyed by The Wall Street Journal had projected that 400,000 jobs were created in April and that the unemployment rate fell to 3.5%—where it stood just before the pandemic and a five-decade low—from 3.6%.
Futures briefly turned higher following the release of the jobs report, which showed another strong month for job gains, before resuming their slide. Some investors said the strong jobs report was outweighed by worries about the Fed’s rate path
The strong jobs report “could also mean that the Fed has a little bit more leeway to be aggressive,” said Amy Kong, chief investment officer at Barrett Asset Management.
Valuations for U.S. markets have “moved from rich to very rich” in the past 10 years as stock prices have risen more than earnings, said Frank Benzimra, head of Asia equity strategy at Société Générale. But as interest rates climb, the value that investors place on companies’ future cash flows is decreasing, he said.
Brent crude, the global oil benchmark, rose 2.1% to $113.21 a barrel, extending a recent run of gains driven by expectations that the European Union was set to ban imports of Russia’s oil in response to its invasion of Ukraine. Gold prices edged up 0.4%
Overseas, benchmark indexes in both Asia and Europe retreated, tracking losses in the U.S., with declines most pronounced for the tech-heavy Hang Seng Index, which slumped 3.8%. In mainland China, the Shanghai Composite Index fell 2.2%. In Europe, the pan-continental Stoxx Europe 600 fell 1.9%.
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