NEW YORK, June 23 (Reuters) – US stocks closed lower on Friday, capping a week marked by Federal Reserve Chairman Jerome Powell’s statement in which he announced further interest rate hikes but vowed that the central bank would co-operate will proceed with caution.
All three major US equity indices lost ground in a broad sell-off, with rate-sensitive megacap stocks detracting the most from the tech-heavy Nasdaq Composite Index (.IXIC).
Aside from Powell’s testimony before Congress, there were few market-moving catalysts this week, with all three indices posting weekly losses and ending a week-long rally.
The Nasdaq ended its eight-week winning streak, the longest since March 2019, while the S&P 500 (.SPX) broke its five-week rally, the longest since November 2021.
The S&P 500 and Nasdaq posted their largest Friday-to-Friday percentage declines since early March, when the regional bank liquidity crisis erupted.
“It was an overbought, giving-back market,” said Ross Mayfield, an investment strategy analyst at Baird in Louisville, Kentucky. “[The rally]has been carried on momentum, with participation quite broad, and unsurprisingly markets are taking a pause and the pause has been fairly orderly.”
Mary Daly, President of the San Francisco Fed Bank, said in an interview with Reuters that two more rate hikes this year is a “very reasonable” forecast, echoing Powell’s call for more caution in policy decisions.
Atlanta Fed President Tom Barkin said late Thursday that he was not convinced inflation was on a stable path towards the 2% target, but added that he did not know the outcome of the central bank’s July monetary policy meeting would predict.
According to CME’s FedWatch tool, financial markets have assessed a 74.4 percent chance that the Fed will hike interest rates by another 25 basis points at the July meeting.
“You can probably expect a rate hike next month, but markets are skeptical about this second hike,” Mayfield added. “I’ll be surprised if the inflation data and other economic data leading up to the September meeting (Fed) justify a second rate hike.”
According to preliminary data, the S&P 500 (.SPX) lost 33.48 points, or 0.76%, to close at 4,348.41 points, while the Nasdaq Composite (.IXIC) lost 138.09 points, or 1.01%, to 13,492.52 . The Dow Jones Industrial Average (.DJI) fell 217.07 points, or 0.64%, to 33,729.64.
Used car marketer Carmax Inc (KMX.N) reported better-than-expected quarterly earnings and pushed its shares higher.
Starbucks Corp (SBUX.O) collapsed after its unions announced some 3,500 US workers will go on strike next week to protest the chain’s ban on using decorations in its cafes during Pride month.
The Russell 2000 is expected to complete the recomposition of its stock components soon, which will tend to increase trading volume.
Reporting by Stephen Culp; Additional reporting from Shubham Batra and Shristi Achar A in Bengaluru; Edited by Richard Chang
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