By DAMIAN J. TROISE and ALEX VEIGA – AP Business Writers
Wall Street closed the stock market’s worst week in three months with more losses on Friday, as a stern warning from FedEx about rapidly deteriorating trends in the economy 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 fell 4.8% for the week, with much of the loss coming from a 4.3% rout on Tuesday following a surprisingly hot inflation report. The last time it posted a larger weekly drop was the week ended June 17.
The Dow Jones Industrial Average fell 0.5% and the Nasdaq composite fell 0.9%. The Russell 2000 Small Company Index suffered the heaviest losses, falling 1.5%.
All major indexes have now posted losses in four of the past five weeks.
fedex fell 21.4% for its biggest single-day sell-off on record after warning investors that its fiscal first-quarter earnings are likely to come in lower than expected due to a drop in business. The package delivery service is also closing storefronts and corporate offices and expects business conditions to weaken further.
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Industrial giant General Electric also helped put traders in a selling mood after its chief financial officer said the company was still mired in supply chain issues that were driving up costs. GE shares fell 3.7%.
The worrying corporate updates hit a market already on edge with stubbornly high inflation along with higher interest rates being used to combat it, which will slow the economy. Wall Street is bracing for another sharp interest rate hike from the Federal Reserve next week following a meeting of central bank policymakers.
“Based on this week’s market results, there is no doubt that investors are heading into the weekend, with No. 1 very concerned about the US economy looking at this year’s record and No. 2, with all eyes on Fed action next week,” said Greg Bassuk, CEO of AXS Investments.
The S&P 500 fell 28.02 points to 3,873.33. It is now down 18.7% since the start of the year.
The Dow Jones lost 139.40 points to 30,822.42 and the Nasdaq slipped 103.95 points to 11,448.40. The Russell 2000 gave up 27.04 points at 1,798.19.
Tech stocks, banks and energy companies suffered some of the biggest losses. Adobe fell 3.1%, Bank of America 1.1% and Chevron 2.6%.
Manufacturers of household goods, which are generally considered less risky investments, held up better than the rest of the market. Campbell’s soup rose 1.3%.
The Federal Reserve is aggressively raising interest rates in a bid to quell the highest inflation in four decades, but it has raised concerns that it could hit the brakes too hard and slide the economy into a recession. The central bank has already hiked interest rates four times this year and economists expect another massive three-quarter point hike when Fed leaders meet next week.
Higher interest rates tend to weigh on equities, especially the more expensive tech sector. Technology stocks within the S&P 500 are down more than 26% for the year, and communications companies are down more than 34%. These are the worst performing sectors in the benchmark index year to date.
The housing sector is also suffering from the rise in interest rates. United States medium to long term mortgage rates climbed above 6% this week for the first time since the housing crash of 2008. Rising rates could make an already tight housing market even more expensive for homebuyers.
Reports this week from the government showed that prices for just about everything except gasoline continue to risethe the job market is always hot and consumers continue to spendall of which give arguments to Fed officials who say the economy can tolerate more rate hikes.
“The market is really looking at the data in terms of what the Fed is going to do next year and how far it will have to go,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute. “I think they will be in a good position after September where they will have a lot of flexibility to get to where they want to be by the end of the year.”
Treasury yields fell a bit on Friday after a report showed inflation expectations among U.S. households fell to their lowest levels since last year. This is a positive for the markets, as the Fed fears that an increase in these expectations will make inflation much more difficult to combat. But the survey also showed that uncertainty remains very high among households about the direction of inflation.
The 2-year Treasury yield, which tends to track Fed action expectations, fell to 3.85% from 3.92% shortly before the report was released. The 10-year yield fell to 3.45% from 3.49%.
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