Stocks fell on Friday to cap a brutal week for financial markets as rising interest rates and foreign currency turmoil fueled fears of a global recession.
The Dow Jones Industrial Average fell more than 700 points to fall below 30,000 to a new low for the year. The 30-stock index is down 20% from its peak, known as bear territory on Wall Street. It was last quoted 600 points lower, or 2%. The S&P 500 fell 2.1% and headed for a new 2022 closing low, while the Nasdaq Composite fell about 2.1%.
“The market has moved clearly and quickly from concerns about inflation to concerns about an aggressive Federal Reserve campaign,” said Quincy Krosby of LPL Financial. “You see bond yields rising to levels we haven’t seen in years; it’s changing the mindset of how the Fed gets to price stability without breaking anything.”
The British pound hit a new more than three-decade low against the U.S. dollar after a new U.K. economic plan that included a series of tax cuts jolted markets that fear mostly inflation right now. Major European markets lost 2% on the day.
“This is a global macro mess that the market is trying to sort out,” Krosby said.
Friday marked the fourth consecutive negative session for the major averages. The Fed enacted another sizeable rate hike of 75 basis points on Wednesday and indicated it would make another one at its November meeting.
Expand the Arrows icon pointing outwards
Bond yields soared this week after the Fed’s actions, with 2- and 10-year Treasury rates hitting highs not seen in more than a decade.
Goldman Sachs cut its year-end S&P 500 target because of the rate hike, and predicted at least 4% downside from here.
Stocks positioned to suffer the most in a recession have led this week’s losses with the S&P 500 consumer discretionary sector down 7%. Energy is down more than 9% due to falling oil prices. Growth stocks including tech big names Apple, Amazon, Microsoft and Meta Platforms fell on Friday.
“Based on discussions with our clients, most equity investors have taken the view that a hard landing scenario is inevitable and focuses on the timing, magnitude and duration of a potential recession and the investment strategies for this perspective,” Goldman Sachs wrote. David Kostin in a note to clients as he trimmed his outlook.
The major averages are on pace for their fifth decline in the past six weeks. The Dow is down about 4.5% this week, while both the S&P and Nasdaq are down 5.2% and 5.5%, respectively.