The S&P 500 and the Nasdaq reversed early gains on Friday, with investors piling into defensive sectors while tech and growth stocks took a hit as another Fed official fueled worries of aggressive interest rate hikes.
Boston Federal Reserve Bank President Susan Collins, a voting member of the rate-setting committee this year, said that with little evidence of waning price pressures, the Fed may need to deliver another 75-basis point rate hike to get inflation under control.
This comes a day after hawkish comments from St. Louis Fed President James Bullard unleashed fears that the Fed would continue raising rates further, quashing investor hopes stemming from softer-than-expected inflation reports.
Solid retail sales figures and data on the labor market earlier this week has also highlighted that the Fed has more room to tighten its monetary policy.
“That was a bold move,” said Brandon Pizzurro, director of public investments at GuideStone Capital Management, referring to Collins’ statement.
“The Fed will come out or some fed speak will take place and then markets will retreat, and then the next day they start sniffing around for the next best thing to hope for more upside out of.”
Traders’ bets of a 75-bps rate hike in December have gone up to 24.2% from 19.4% the previous week, according to the CME Group’s FedWatch tool.
At 12:34 p.m. ET, the Dow Jones Industrial Average (.DJI) was up 31.37 points, or 0.09%, at 33,577.69, the S&P 500 (.SPX) was down 5.90 points, or 0.15%, at 3,940.66, and the Nasdaq Composite (.IXIC) was down 67.46 points, or 0.61%, at 11,077.50.
The benchmark S&P 500 (.SPX) and the Nasdaq (.IXIC) have lost 17% and nearly 29%, respectively, so far this year on worries that the aggressive rate hikes could push the economy into a recession.
Among S&P 500 sectors, defensive stocks advanced on Friday, with utilities (.SPLRCU) and health (.SPXHC) rising 1.5% and 0.9%, respectively, and in the lead.
The communication services (.SPLRCL) and consumer discretionary (.SPLRCD) indexes, which house several high growth stocks fell 0.6% and 0.7% respectively.
Energy segment (.SPNY) fell about 2.0% as oil prices declined on concerns about weakening demand in China. .
Gay dating app Grindr skyrocketed 274.0% in its market debut after completing its merger with a special-purpose acquisition company.
Gap Inc (GPS.N) gained 3% after the retailer surpassed quarterly sales and profit estimates, helped by steady demand despite a surge in inflation.
Discount retailer Ross Stores Inc (ROST.O) jumped 10.5% after its third-quarter profit beat estimates.
Advancing issues outnumbered decliners by a 1.19-to-1 ratio on the NYSE and for a 1.01-to-1 ratio on the Nasdaq.
The S&P index recorded seven new 52-week highs and two new lows, while the Nasdaq recorded 45 new highs and 96 new lows.
