NEW YORK, Oct 14 (Reuters) – US stocks fell on Friday as deteriorating inflation expectations kept intact fears that the Federal Reserve’s aggressive rate-hiking path could trigger a recession as investors digested the early stages of the earnings season.
In the final session of a volatile week, shares opened higher then reversed course after University of Michigan data showed consumer sentiment improved in October but inflation expectations worsened as gasoline prices rose. Retail sales data also showed consumer resilience.
“Right now, the primary market direction is higher interest rates, higher inflation, and the Fed will continue to raise its fed funds target,” said Anthony Saglimbene, chief markets strategist at Ameriprise Financial in Troy, Michigan.
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“The narrative that we’ve seen peak inflation isn’t apparent yet, and that’s depressing the market.”
On Thursday, a consumer price index (CPI) reading showed that inflation remained stubbornly high.
Fed officials were largely unanimous when commenting on the need for a rate hike, and St. Louis Fed President James Bullard said in a Reuters interview that the latest CPI data showed a continued “pull forward” by larger moves of three Justifying a quarter of a percentage point, although this is the case, does not necessarily mean that rates need to be raised above the central bank’s latest projections.
The Dow Jones Industrial Average (.DJI) fell 403.89 points, or 1.34%, to 29,634.83, the S&P 500 (.SPX) lost 86.84 points, or 2.37%, to 3,583.07 and the Nasdaq Composite (.IXIC) fell 327.76 points 3.08% to 10,321.39.
Friday’s drop marked the 37th time the S&P 500 has posted a gain or loss of at least 2%, compared to just seven such sessions in all of 2021. On the week, the Dow was up 1.15%, the S&P 500 lost 1.56% and the Nasdaq fell 3.11%.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. October 7, 2022. REUTERS/Brendan McDermid
The corporate earnings season began to pick up speed, helping the Banking Index (.SPXBK) rise marginally up 1.66% and Citigroup Inc (CN) after quarterly results from JPMorgan Chase & Co (JPM.N) up 1.66%. 03% was up 0.65% and Wells Fargo & Co (WFC.N) was up 1.86%, boosting shares of both companies.
“The message I’ve gotten from them is that from an economic perspective things are looking pretty good despite the challenges, but they’ve increased loan loss provisions just in anticipation that you’ll see a further slowdown,” Brian said Jacobsen, Senior Investment Strategist at Allspring Global Investments in Menomonee Falls, Wisconsin.
UnitedHealth rose 0.63% as one of just three Dow constituents to climb higher the day after the health insurer released better-than-expected quarterly earnings while also raising its full-year guidance.
Analysts now expect third-quarter earnings for S&P 500 companies to have risen just 3.6% year over year, much less than the 11.1% increase expected in early July, according to data from Refinitiv.
Kroger Co (KR.N) shares fell 7.32% after the supermarket chain announced it would buy smaller rival Albertsons Companies Inc (ACI.N) in a $24.6 billion deal.
Tesla Inc (TSLA.O) tumbled 7.55% after media reports reported that the electric vehicle maker has shelved plans to start battery cell production at its plant outside of Berlin due to technical issues.
Volume on US exchanges was 10.88 billion shares compared to the average of 11.48 billion for the entire session over the last 20 trading days.
Declining issues predominated on the NYSE at a 4.20 to 1 ratio; on the Nasdaq, a 2.87 to 1 ratio favored decliners.
The S&P 500 posted 5 new 52-week highs and 7 new lows; the Nasdaq Composite posted 71 new highs and 235 new lows.
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Additional reporting by Herbert Lash and Noel Randewich; Edited by Chizu Nomiyama and David Gregorio
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