The S&P 500 fell to a two-month low on Friday in a losing week for U.S. stocks, with FedEx’s profit warning underscoring concerns about economic weakness, just as investors braced for another interest rate hike by the Federal Reserve.
Friday’s session featured a triple-whammy — the quarterly expiration of stock index futures, stock index futures and stock options — when markets are vulnerable to swings.
The S&P 500 fell below 3,900 for the first time since July 18. Defensive consumer staples and utilities groups were the only gainers among the index’s 11 sectors. Each of Wall Street’s major indexes fell for the week, led by a more than 5% drop in the Nasdaq Composite.
Shares of FedEx fell after the package delivery company issued a profit warning for its fiscal first quarter and dropped its previous earnings estimates for the year. It said results were hurt by a global weakening in volume, which accelerated towards the end of the period. FedEx CEO Raj Subramaniam told CNBC on Thursday that he predicts a recession in the global economy.
Here are the U.S. indexes at the 9:30 a.m. opening bell on Friday:
- S&P 500: 3,873.33, down 0.72%
- Dow Jones Industrial Average: 30,822.42, down 0.45% (139.40 points)
- Nasdaq Composite: 11,448.40, down 0.90%
Investors fear the Fed’s rate hike will send the U.S. economy into recession as it struggles to tame red-hot inflation. Stocks have yet to hit their lows this year because “the inflationary shock is not yet over,” Bank of America’s Michael Hartnett wrote in a weekly note published Friday. But the S&P 500 may also be getting closer to exiting the bear market, he said.
“With the S&P 500 hovering below the all-important 3,900 level and the 10-year Treasury yield still nearing 3.5%, the Fed-sensitive 2-year Treasury note is flirting with 3.9%, suggesting that the Fed’s aggressive campaign killing outside of inflation should be taken seriously,” Quincy Krosby, chief global strategist at LPL Financial, wrote on Friday. “The canary in the coal mine may not be dead yet, but it’s probably having trouble breathing.”
The Fed meets on September 20-21 and is expected to raise the Fed funds rate by 75 basis points from the current 2.25% to 2.5%. The Fed has raised rates four times this year to pull inflation back to its 2% target.
Here’s what’s happening today:
- The argument that “there is no alternative” to buying stocks has been undermined as cash yields rise, Bank of America said.
- The German government has seized three oil refineries in the country owned by Russian energy giant Rosneft to deal with Europe’s growing energy crisis.
- Turkey is ready to sign a deal that will see it pay in rubles for 25% of its Russian natural gas imports, Russian President Vladimir Putin said.
- A “Black Swan” fund chief has warned that the Fed’s rate hikes could cripple markets and the economy – and cause a bigger problem than inflation.
- The British pound fell to its lowest level against the US dollar in nearly four decades after an unexpected drop in retail sales fueled renewed fears of a UK recession.
- Fundstrat said it’s time to buy the dip in stocks as data shows inflation is falling and the market bottomed out in June.
For commodities, bonds and cryptocurrencies:
- West Texas Intermediate crude rose 0.3% to $85.43 a barrel. Brent crude, the international benchmark, rose 0.9% to $91.68.
- Gold rose 0.4% to $1,685.60 an ounce.
- The 10-year Treasury yield fell 2 basis points to 3.45%.
- Bitcoin fell 1.3% to $19,574.11.