U.S. Stocks See Further Downside Amid Worries Interest Rates, Economy

Stocks showed a significant move to the downside during trading on Friday, extending the sharp pullback seen over the two preceding sessions. With the continued weakness, the major averages fell to their lowest closing levels in over a month.

The major averages regained some ground going into the close but remained firmly negative. The Dow slid 281.76 points or 0.9 percent to 32,920.46, the Nasdaq slumped 105.11 points or 1.0 percent to 10,705.41 and the S&P 500 tumbled 43.39 points or 1.1 percent to 3,852.36.

For the week, the tech-heavy Nasdaq plummeted by 2.7 percent, while the S&P 500 and the Dow plunged by 2.1 percent and 1.7 percent, respectively.

The extended sell-off on Wall Street came amid ongoing concerns about the outlook for interest rates and the economy.

The Fed’s hawkish tone in Wednesday’s monetary policy announcement has added to worries about the central bank’s aggressive rate hikes tipping the economy into a recession.

While inflation has recently shown signs of slowing, the Fed signaled it plans to continue raising interest rates next year.

A recent batch of disappointing economic data has led to fears the Fed’s fight against inflation is already taking its toll on the economy.

Next week, the Commerce Department is due to release its report on personal income and spending, which includes a reading on inflation said to be preferred by the Fed.

With Fed Chair Jerome Powell saying the central bank will require “substantially more evidence” inflation is on a sustained downward trend before halting its rate hikes, traders are likely to keep a close eye on the inflation reading.

Sector News

Interest rate-sensitive commercial real estate stocks turned in some of the worst performances on the day, dragging the Dow Jones U.S. Real Estate Index down by 2.6 percent to its lowest closing level in over a month.

Significant weakness was also visible among natural gas stocks, as reflected by the 2.1 slump by the NYSE Arca Natural Gas Index.

The sell-off by natural gas stocks came amid a steep drop by the price of the commodity, with natural gas for January delivery plunging $0.37 or 5.3 percent to $6.60 per million BTUs.

Airline, utilities and oil service stocks also saw considerable weakness on the day, moving lower along with most of the other major sectors

Other Markets

In overseas trading stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan’s Nikkei 225 Index tumbled by 1.9 percent, while Australia’s S&P/ASX 200 Index slid by 0.8 percent.

The major European markets also moved to the downside on the day. While the German DAX Index fell by 0.7 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index slumped by 1.1 percent and 1.3 percent, respectively.

In the bond market, treasuries climbed well off their early lows but still closed in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.2 basis points to 3.482 percent after reaching a high of 3.557 percent.

Looking Ahead

Along with next week’s closely watched inflation reading, traders are also likely to been an eye on a slew of housing data as well as reports on consumer confidence and durable goods orders.

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