US stocks falter as volatile trading persists

U.S. stocks faltered on Friday, with major indexes extending the saw-saw moves that injected fresh volatility into markets this week.

The S&P 500 recently fell 0.8%. The Dow Jones Industrial Average lost 0.9%, while the Nasdaq Composite was roughly flat. All three major indexes fell on Thursday, closing at their lowest levels since 2020. Thursday’s drop reversed a rally in stocks on Wednesday.

Stock indices are on track to end the week with steep losses as investors assess inflation, central banks’ response to it and the outlook for the global economy. The Federal Reserve earlier this week approved the largest interest rate hike since 1994 and signaled it would continue raising rates this year at the fastest pace in decades to fight inflation.

Recent rate hikes reversed an earlier cycle of monetary policy easing that had allowed stock and bond prices to recover in recent years. The prospect of repeated rate hikes throughout the year prompted investors to sell both assets and raised fears that a rapid tightening could dampen growth. Mortgage rates in the United States recently hit their highest level in more than 13 years. Recent economic data has shown steep declines in key sectors.

“Central banks, who have been our friends for a very long time, tell us that we should expect pain,” said Hani Redha, portfolio manager at PineBridge Investments. “That inflation number is the only thing that matters right now. Even if we see a big slowdown in growth, that won’t be enough to change course for the Fed.

Mr Redha said it is possible that inflation will continue to climb in the coming months as energy prices remain high. Brent crude, the international benchmark for oil prices, edged down 2.4% to $117.03 a barrel.

European natural gas prices edged down 0.6% on Friday, sending them up nearly 50% for the week. Moscow’s decision to drastically cut natural gas exports to Europe this week has plunged the continent’s energy crisis into a dangerous new phase that threatens to drain vital fuel supplies and crush the continent’s economy.

Where in the US household budget is inflation hitting the hardest? The WSJ’s Jon Hilsenrath traces the roots of rising prices to understand why some sectors have risen much more than others. Photo illustration: Laura Kammermann/WSJ

Signs persisted that investors were looking for assets considered safe to hold, such as the US dollar and US government bonds. The WSJ Dollar Index, which measures the greenback against a basket of 16 currencies, rose 0.9%. In bond markets, the yield on benchmark 10-year Treasury bills fell to 3.262% from 3.303% on Thursday. Yields fall as prices rise.

The dollar value of bitcoin and other cryptocurrencies showed tepid signs of stabilizing after falling sharply in the previous 10 days. Bitcoin remained roughly unchanged from its level at 5 p.m. ET on Thursday to trade at $20,637 on Friday. Cryptocurrencies have been hit by rising interest rates that are undermining appetite for riskier assets and concerns about certain projects and companies in the crypto ecosystem.

Adobe shares fell 4.1% after the creativity, marketing and document software provider issued looser-than-expected guidance.

Overseas, the pancontinental Stoxx Europe 600 index gained 0.7%. Shares of mining and commodities trading giant Glencore rose 0.8% in London trading after the company raised prices and costs for its coal operations and said its business of trading exceeded expectations.

Shares on Wall Street closed sharply lower on Thursday, with the Dow Jones Industrial Average below 30,000.


Photo:

BRENDAN MCDERMID/REUTERS

In Asia, the Bank of Japan kept interest rates ultra-low on Friday, confirming that it will not join the Federal Reserve and other major global central banks in tightening monetary policy. Japan’s Nikkei 225 stock index fell 1.8% and the Japanese yen fell 1.8% against the dollar.

South Korea’s Kospi edged down 0.4%, while China’s Shanghai Composite gained 1%.

Write to Caitlin Ostroff at [email protected]

inflation and the economy

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