Dow surges 100 points on Friday, stocks post weekly losses after Fed comments

US stocks posted losses for the week on Friday as investors braced for tighter monetary policy from the Federal Reserve, with both the S&P 500 and the Nasdaq falling after three straight weeks of gains.

The Dow Jones Industrial Average rose 137.55 points, or 0.4%, to 34,721.12, while the S&P 500 fell 0.27% to 4,488.28. The Nasdaq Composite fell 1.34% to 13,711.00.

All major averages declined for the week, with the S&P 500 closing down 1.27% and the Nasdaq down 3.86%. The Dow is down 0.28% so far this week, posting back-to-back weekly declines.

The market moves came as investors reacted to the Federal Reserve’s change in tone, signaling that it will act even more aggressively to fight inflation.

“Not that there is necessarily anything ‘positive’ happening or that buyers are rushing into the market, but the bad news is fully absorbed at the moment and the market is now waiting for the next data point,” wrote Vital’s Adam Crisafulli. Knowledge. .

“We are still of the opinion that nothing really important happened this week other than the [Fed Governor Lael Brainard] comments on Tuesday morning, and the last few days have been a function of digesting his words,” he added.

Technology stocks led losses on the day as investors dumped riskier stocks in anticipation of higher interest rates that would limit future earnings growth for the group. Chipmakers such as Nvidia and Micron, which have struggled amid supply chain shortages and concerns of an impending recession, fell 4.5% and 1.4%, respectively, while stocks Tesla, Alphabet and Apple fell 3%, 1.9% and 1.2%.

Robinhood shares fell nearly 7% after Goldman Sachs downgraded the trading app to sell from neutral. UPS fell about 1% due to a Bank of America downgrade citing concerns about weakening demand and falling prices in the industry.

The health care and consumer staples sectors rallied this week as investors worried about the slowing economy turned to stocks with steady gains. Merck and UnitedHealth Group rose again on Friday. Both stocks closed the week up 5% and 6.5%, respectively.

Meanwhile, financial sector companies such as JPMorgan Chase and American Express rallied, giving up some of the week’s earlier losses.

Friday’s moves come after the Fed released minutes from its March meeting on Wednesday, which revealed that policymakers plan to cut their bond holdings by a consensus amount of about $95 billion. The central bank is also considering interest rate hikes of 50 basis points at future meetings.

Brainard’s comments earlier in the week indicated that the central bank could start reducing its balance sheet at a “rapid pace” as early as May.

“Their primary tool is the Fed funds rate, so that’s about it, but on top of that they’re going to start taking liquid out of the system,” said Kathy Bostjancic, chief US economist at Oxford Economics. “They are going to reduce their purchases of Treasury securities and mortgage-backed securities by a trillion a year. That is a lot of liquidity that has been taken out of the system and private investors will have to fill the gap.”

The Fed’s pivot has caused rates to soar higher, with the 10-year Treasury yield hitting a new three-year high on Friday, topping 2.7%. The rate ended last week at 2.38% and started the year at 1.63%.

“The unusually fast hike cycle indicates that, in hindsight, the Fed’s (and most economists’) ‘transient inflation’ narrative was overly optimistic and the Fed now has to aggressively play catch-up after falling behind the curve,” wrote Maneesh Deshpande, head of US equity strategy at Barclays. “We remain cautious and believe the advantage is limited.”

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Oil prices, which have been volatile during the Russian-Ukrainian war, rose slightly on Friday. US West Texas Intermediate (WTI) crude oil added 2.32% to close at $98.26, while Brent crude gained 2.19% to close at $102.78. Energy companies including Occidental Petroleum and Halliburton closed higher on Friday.

Investors look forward to earnings season next week, which will kick off with reports from five big banks. JPMorgan will report before the bell on Wednesday. Citi Group, Goldman Sachs, Morgan Stanley Y fargo wells will report before the markets open on Thursday.

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