Wall Street closed mixed on Friday after witnessing a highly volatile session. Mounting inflation, an ultra-hawkish Fed, prolonged war between Russia and Ukraine and concerns of a near term U.S. economic recession significantly dented market participants’ confidence. The Dow and the S&P 500 managed to ended in the green while the Nasdaq Composite finished in red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) was up 8.8 points to close at 31,261.90. Notably, 17 components of the 30-stock index ended in positive territory while 13 in negative zone. The blue-chip index started the day with 275 points up. However, the index lost 600 points at its intraday low. The Dow is currently trading at 15.4% below its 52-week high.
The tech-heavy Nasdaq Composite finished at 11.354.62, falling 0.3% due to the disappointing performance of large-cap technology stocks. The tech-laden index has posted its lowest closing since November 3, 2020. The index is in bear market since March and currently trading at 30% below its 52-week high.
Meanwhile, the S&P 500 managed to gain 0.57 points to end at 3,901.36. The broad-market index briefly entered into bear market zone during intraday trading. The S&P 500 is currently trading at 19% below its 52-week high.
Seven out of 11 broad sectors of the benchmark index closed in positive zone while four in red. The Consumer Discretionary Select Sector SPDR (XLY) lost 1.7%. The Health Care Select Sector SPDR (XLV) and the Real Estate Select Sector SPDR (XLRE) advanced 1.2% each.
The major loser of the S&P 500 was Ross Stores Inc. (
ROST Quick Quote ROST - Free Report) . Shares of this company plummeted 22.5% after posting first-quarter fiscal 2022 adjusted earnings per share of $0.97, well short of the Zacks Consensus Estimate of $0.99. Ross Stores currently carries a Zacks Rank #3 (Hold). You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
The fear-gauge CBOE Volatility Index (VIX) was up 0.3% to 29.43. A total of 13 billion shares were traded Friday, lower than the last 20-session average of 13.5 billion. Decliners outnumbered advancers on the NYSE by a 1.16-to-1 ratio. On Nasdaq, a 1.24-to-1 ratio favored declining issues.
Bearish Sentiments Grip Wall Street
Wall Street has been witnessing a sharp fall since April. Several measures of inflation are currently at a 40-year high and showing no signs of climb down. The global supply-chain system is in a mess. China is yet recover fully from the resurgence of COVID-19.
Moreover, prolonged war between Russia and Ukraine has made the inflation worst. The prices of commodities especially crude oil and natural gas remain elevated due to war. More painful is that together Ukraine and Russia were the largest wheat exporters globally. Food inflation has jumped after several Asian and African countries decided to ban exports of agricultural and poultry products.
The Fed has already hiked the benchmark lending rate by 75 basis points and has given a clear indication of two more rate hikes of 50 basis points each in June and July. The central bank terminated the $120 billion monthly quantitative easing program in March and will start shrinking its $9 trillion balance sheet from June.
Market participants are expecting the Fed to take a harsher strategy to combat inflation. On May 12, Fed Chair Jerome Powell admitted that he cannot give any guarantee for a soft landing of the economy under a higher interest rate regime.
Last week was highly disappointing for Wall Street. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – tanked 2.9%, 3.1% and 3.8%, respectively. The Dow registered eighth consecutive weekly decline, its longest since April 1932. Both the S&P 500 and the Nasdaq Composite declined for seventh straight week, marking their longest weekly losing streak since March 2001.
Fear of an impending recession of the U.S. economy and continuation of higher inflation and interest rate throughout 2022 have destroyed investors’ confidence on risky assets like equities.