Wall Street slips as Nasdaq records worst month since 2008
“Increasing cost pressure and an uncertain outlook from the biggest names in tech had investors rattling ahead of the weekend and investors are unlikely to be comfortable anytime soon with the Fed widely expected to offer a 50% hike. basis points with a hawkish message next week,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.
The S&P 500 fell 155.57 points to 4,131.93 on Friday. The benchmark is now down 13.3% for the year. The Dow fell 939.18 points to 32,977.21. The Nasdaq slipped 536.89 points to 12,334.64. It is down 21.2% so far this year.
Smaller company stocks also had a tough day. The Russell 2000 slipped 53.84 points, or 2.8%, to 1,864.10.
Big Tech led the market lower all month, with traders avoiding the high-flying sector. The tech had made gigantic gains during the pandemic and is now starting to look overvalued, especially with interest rates set to rise sharply as the Fed steps up its fight against inflation.
Internet retail giant Amazon fell 14%, one of the biggest declines in the S&P 500, a day after reporting a rare quarterly loss and giving investors a disappointing earnings forecast. Amazon’s weak update comes as Wall Street worries about a potential slowdown in consumer spending as well as rising inflation.
Prices for everything from food to gasoline have risen as the economy recovers from the pandemic and there has been a big disconnect between higher demand and lagging supplies. Russia’s invasion of Ukraine has only heightened inflation concerns as it drives up the prices of oil, natural gas, wheat and corn.
The Commerce Department reported Friday that an inflation indicator closely monitored by the Federal Reserve jumped 6.6% in March from a year ago, the highest 12-month jump in four decades and further proof that soaring prices are putting pressure on household budgets and the health of the economy.
The latest report on rising US inflation follows a report by statistics agency Eurostat which showed inflation hit a record high in April of 7.5% for the 19 countries that use the euro.
Bond yields rose on hot inflation readings. The yield on the 10-year Treasury rose from 2.85% to 2.92%.
The persistent rise in inflation prompted central banks to raise interest rates to lessen the impact on businesses and consumers.
Much of the anxiety on Wall Street in April focused on how quickly the Fed will raise its benchmark interest rate and whether an aggressive round of hikes will dampen economic growth. The Fed chairman indicated that the central bank may raise short-term interest rates to double the usual amount in upcoming meetings, starting next week. It has already raised its overnight rate once, the first such increase since 2018, and Wall Street expects several big increases in the coming months.
Investors spent much of April shifting money from big tech companies, whose stock values benefit from low interest rates, to areas considered less risky. The S&P 500 consumer staples sector, which includes many home and personal goods makers, was the only sector in the benchmark to post gains in April. Other safe sectors, such as utilities, held up better than the broader market, while technology and communications stocks were among the biggest losers.