Stock futures traded lower on Friday to end another week of losses as investors fretted that the Federal Reserve’s aggressive rate hikes to fight inflation would lead to an economic downturn.
Dow Jones Industrial Average futures fell 359 points, or 1.2%. S&P 500 futures fell 1.3%. Nasdaq 100 futures fell 1.4%.
Friday will mark the fourth straight session of losses for the major indexes. The U.S. Federal Reserve raised interest rates by three-quarters again in a massive three-quarters hike on Wednesday and said it would raise rates again at its November meeting.
Bond yields have surged this week on the Fed’s actions, with 2-year and 10-year Treasury rates hitting highs not seen in more than a decade. Stocks set to suffer the most in a recession this week led losses, with the Consumer Discretionary Select Sector SPDR Fund down more than 5%. The Real Estate Select Sector SPDR Fund fell 6%.
Goldman Sachs cut its year-end target for the S&P 500 due to rising interest rates, expecting a downside of at least 4%.
“You’ve just experienced this volatility that no one seems to understand,” said Tim Lesko, senior wealth advisor at Mariner Wealth Advisors.
Following the Fed’s decision this week to raise interest rates by 75 basis points and FedEx CEO Raj Subramaniam, more and more investors are starting to accept that a recession may be coming, Lesko said. Speaking on CNBC last week, he believed it was coming. Once that happens, investors will react differently, Lescoe said.
“At some point, they’ll find out that a recession isn’t the end of the world, and they’ll start having a constructive impact on the stock market again,” he said. “But now, we’re acting like the sky is falling.”
The major averages fell for the fifth time in the past six weeks. The Dow is down about 2.4% for the week, near its 2022 closing low set in June. The S&P and Nasdaq both edged lower, down 3% and 3.3%, respectively, so far this week. So far in 2022, the S&P 500 is down 21%.
Costco fell about 3% in premarket trading on Friday. While the retailer reported fiscal fourth-quarter revenue and earnings that beat analysts’ expectations, freight and labor costs are rising.