S&P 500 ends down as investors fret about interest rates

As has been the trend lately, it was yet another volatile day with all the indexes spending until about 1 pm deeply in the red, the Dow down some 180 points in the morning, but then beginning a rebound and close to a full recovery but not quite as both the S&P and Nasdaq still closed in the red, the Dow the sole gainer with a +129 points. Again, it was rate hike worries with both Goldman Sachs and BofA upping their estimates to 3 hikes for the year vs the prior forecast of 2.  

And then there were the two Fed governors making statements that interest rates would continue to go up. Not to mention that the May watermark rate of 5% was raised to a July watermark of 5.3 percent.  All in all, nothing that the market wanted to hear with investors fleeing for safety to the defensive sectors of consumer staples and utilities with the one big consolation being “it’s hard to go into a recession with a strong labor market at the same time.”  Volume remains light at 10.6 billion. 

Fri  February 17, 2023  4:21 PM

S&P 500 ends down as investors fret about interest rates

By Noel Randewich

DJ: 33,696.85  -431.20        NAS: 11,855.83  -214.76        S&P: 4,090.41  -57.19      2/16

DJ: 33,826.69  +129.84       NAS: 11,787.27  -68.56          S&P: 4,079.09  -11.32      2/17

Feb 17 (Reuters) - The S&P 500 ended lower on Friday, weighed down by Microsoft and Nvidia as investors worried that inflation and a strong U.S. economy could put the Federal Reserve on pace for more interest rate hikes.  The see-saw session on Wall Street followed economic data this week that pointed to elevated inflation, a tight job market and resilience in consumer spending, giving the Fed more room for to raise borrowing costs.  Goldman Sachs and Bank of America forecast three more rate hikes this year and by a quarter of a percentage point each, up from their previous estimate of two rate rises.  Traders are expecting at least two more rate increases and see the Fed rate peaking at 5.3% by July as central bank attempts to cool the economy and reduce inflation.

"A dark cloud has drifted over the stock market in the last two weeks based on a higher watermark for the Fed funds rate," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.  "The jobs numbers aren't getting weaker, and it's hard to go into a recession with a strong labor market at the same time. That means the Fed could push the button and move rates higher," Dollarhide said.

Microsoft Corp <MFST.O> fell 1.6% and Nvidia (NVDA.O) dipped 2.8%, both weighing on the S&P 500 as the yield on 10-year Treasury notes hit a three-month high.

The CBOE Volatility index (.VIX), also known as Wall Street's fear gauge, traded above 20 points for a second session in a row.  Of the 11 S&P 500 sector indexes, six rose, led by consumer staples (.SPLRCS), up 1.29%, followed by a 1% gain in Utilities (.SPLRCU). Energy dropped 3.65%, with Exxon Mobil losing 3.8%.

The S&P 500 declined 0.28% to end the session at 4,079.09 points.  The Nasdaq fell 0.58% to 11,787.27 points, while Dow Jones Industrial Average rose 0.39% to 33,826.69 points.  For the week, the S&P 500 fell 0.3%, the Dow lost 0.1% and the Nasdaq climbed 0.6%.  The S&P 500 has gained about 6% so far in 2023, while the Nasdaq has rebounded about 13% following deep losses last year.

Adding to recent worries about monetary policy, Fed Governor Michelle Bowman said the central bank will need to keep raising interest rates until it makes much more progress tackling inflation. Richmond Fed President Thomas Barkin said the central bank still needs to raise interest rates, but that it could stick with quarter-point increases.

Moderna Inc <MRNA.O> fell 3.3% after its experimental messenger RNA-based influenza vaccine delivered mixed results in a study.  Deere & Co (DE.N) surged 7.5% after the world's largest farm equipment maker raised its annual profit and beat quarterly earnings expectations.  Lithium miners Livent Corp (LTHM.N), Albemarle Corp (ALB.N) and Piedmont Lithium Inc (PLL.O) slumped between 10% and 12% due to concerns about weakness in Chinese prices for the EV battery metal.  The most traded company in the S&P 500 was Tesla Inc , with $42.9 billion worth of shares exchanged during the session. The shares rose 3.10%.

U.S. stock markets will be closed on Monday on account of Presidents' Day.

Advancing issues outnumbered falling ones within the S&P 500 (.AD.SPX) by a 1.1-to-one ratio.  The S&P 500 posted eight new highs and one new low; the Nasdaq recorded 75 new highs and 68 new lows.

Volume on U.S. exchanges was relatively light, with 10.6 billion shares traded, compared with an average of 11.7 billion shares over the previous 20 sessions.