Wall Street falls as FedEx warning adds to market woes
BEIJING Wall Street closed the stock exchange ”s worst week in three month with more losses Friday as a stark warning by FedEx about rapidly worsening economic trends rattled already anxious investors.
The S&P 500 fell 0.7%, with all but two of its 11 company sectors ending in the red. The benchmark index fell 4.8% over the week. This was largely due to a 4.3% plunge on Tuesday, following a surprising hot report on inflation. The last time it posted a bigger weekly decline was the week ended June 17.
The Dow Jones Industrial Average dropped 0.5%, while the Nasdaq composite fell 0.9%. The Russell 2000 index for smaller companies suffered the most severe losses, dropping 1.5% All major indexes have suffered losses in the past five weeks.
FedEx sank 21.4% for its biggest single-day sell-off on record after warning investors that profits for its fiscal first-quarter will likely fall short of forecasts because of a dropoff in business. The package delivery company is closing down corporate offices and storefronts as it expects that business conditions will worsen.
Industrial giant General Electric also helped put traders in a selling mood after its chief financial officer said the company is still bogged down by supply chain problems that were raising costs. GE shares fell 3.7%.
The worrisome corporate updates came at a time when the market was already on edge due to stubbornly high inflation and the higher interest rates being used in order to combat it. This will slow down the economy. Wall Street is anticipating another big interest rate hike by the Federal Reserve next week after a meeting of central bank policymakers.
“Based upon this week’s market results, it’s clear that investors are heading into the weekend. 1 is very concerned about the U.S. economic situation and will be looking at the balance of the year. 2. All eyes are on the Fed action next week,” said Greg Bassuk CEO of AXS Investments.
The S&P 500 fell 28. 02 points to 3,873.33. It’s now down 18.7% so far this year.
The Dow dropped 139. 40 points to 30,822. 42 and the Nasdaq slid 103. 95 points to 11,448.40. The Russell 2000 gave up 27. 04 points to 1,798.19.
Technology stocks, banks and energy firms had some of the biggest losses. Adobe dropped 3.1%, Bank of America fell 1.1%, and Chevron lost 2.6%.
Makers household goods, which are generally considered less risky investments than the rest, performed better than the rest. Campbell Soup saw an increase of 1.3%.
The Federal Reserve is raising interest rates aggressively to cool the hottest inflation for four decades. However, this has raised concerns that it could push the economy into recession by increasing the brakes too much. Economists predict a further three-quarters point increase by the Fed’s leaders next week. The central bank has already raised interest rate four times this year.
Higher interest rates tend to be more expensive for stocks, particularly in the technology sector. Technology stocks within the S&P 500 are down more than 26% for the year and communications companies have shed more than 34%. They have been the worst performing sector in the benchmark index this year.
The housing sector is also suffering from rising interest rates. The average long-term U.S. mortgage rate rose above 6% this week, the highest level since the housing crash of 2008.. Higher rates could make an already tight housing market more expensive for homebuyers.
Reports from the government this week showed that prices for almost everything except gas are rising, that the job market remains hot and that consumers continue to spend. All of these factors give ammunition to Fed officials, who believe the economy can handle more rate increases.
” The market is really looking at data to see what the Fed will do next year and how far they have to go,” Scott Wren, senior global strategist at Wells Fargo Investment Institute, said. “I think they’ll be in a good spot after September, where they’ll have plenty of flexibility to get where they want to be by the end of the year.”
Treasury yields eased a bit Friday after a report showed expectations for inflation among U.S. households are falling to their lowest levels since last year. This is a positive for markets as the Fed fears that rising inflation expectations will make it more difficult to fight. However, the survey showed that households remain unsure about where inflation is headed.
The yield on the 2-year Treasury fell to 3. 85% from 3. 92% shortly before the report’s release. The 10-year yield fell to 3. 45% from 3.49%.
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