U.S. equity gauges on Friday succumbed to a bearish gravitational pull lower, with the action in the first half of the session marked by big intraday swings.
The return of volatility likely has taken a toll on investor sentiment already rattled by a series of whipsaw sessions on Wall Street, with several once-highflying segments of the market underwater.
How are stock indexes trading?
- The S&P 500 SPX, -1.69% was trading 72 points, or 1,6%, lower to 4,409, hitting a fresh intraday low.
- The Dow Jones Industrial Average DJIA, -1.18% was trading 375 points, or 1.1%, lower to around 34,348.
- The Nasdaq Composite Index COMP, -2.27% was trading down 323 points, or 2.3%, breaching a psychological round-number level at 14,000.
- For the week, the Nasdaq Composite was headed for a 7.2% drop, which would be the worst such performance since late October 2020. The S&P 500 was on track for a 5.5% decline and the Dow was poised to fall 4.4% for the holiday-shortened week.
On Thursday, stocks fell, with the Nasdaq Composite ending with a loss of 1.3%, erasing a 2.1% rise seen earlier in the day and recording the index’s largest same-day reversal since April 7, 2020.
What’s driving the markets?
A bearish pall is being cast over the market on Friday and volatility has become the new normal, with investors stomaching notable intraday prices swings to conclude a withering week for bullish investors.
The S&P 500 was looking at its third straight weekly loss, and on track for its worst weekly return since late October 2020, according to FactSet data.
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The stats are worse for the Nasdaq Composite, which was poised for its fourth straight weekly loss, with one more down session putting it on track for the longest string of declines since 2012.
After entering correction territory on Wednesday, the Nasdaq deepened that rout on Thursday. The index is down around 13% from its record close in November, meeting the definition of a market correction.
Much discussion around the recent bout of weakness in equities has been centered on the rise in yields and the prospect for higher benchmark rates. Markets have been dogged by a bond market selloff and fears of Federal Reserve tightening to combat surging inflation, and that has particularly hit rate-sensitive technology stocks.
Both Wednesday and Thursday saw indexes log gains early in the day only to surrender them later, rattling investors.
However, a bumpy start to earnings season also has dented investor confidence, with a string of downbeat bank results, and gloom about Netflix NFLX, -22.77%, after the streaming service reported far weaker than expected subscriber growth numbers.
“Thus far in January, upward earnings revisions tumbled to 58.6% from 71.8% in December and 70.7% in November, versus a peak of 82.3% in August,” analysts at Citigroup wrote.
“Peaking of revision momentum could be a catalyst for market weakness,” the Citi analysts wrote.
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Peter Cardillo, chief market economist at Spartan Capital, said lowered guidance from major banks has been a key factor. “Nevertheless, we are at the beginning of the earnings season and remain confident that overall grades will bolster the market’s fundamentals, thereby softening the blow of rising yields,” he said.
The yield on the 10-year Treasury note TMUBMUSD10Y, 1.752% was down 8 basis point at 1.76%, but has soared this month, from 1.5% at the start of January.
Meanwhile, cryptocurrencies were under pressure also, with bitcoin BTCUSD, -8.17% tumbling below a key support level at $40,000, dragging the sector lower. The losses come a day after Russia’s central bank proposed banning the use and mining of cryptos.
The economic calendar is light Friday, featuring only the Conference Board’s December leading economic index, which rose 0.8%, in line with forecasts and signaling steady growth even as the spread of the omicron variant of the coronavirus nibbled at economic activity.
Which companies are in focus?
- Peloton Interactive PTON, +13.19% shares climbed 10% Friday after Chief Executive John Foley pushed back against media reports claiming a production halt and layoffs that triggered a 23% plunge during Thursday’s regular trading session.
- Netflix’s stock is down 21% on Friday, while shares of rival Walt Disney & Co. DIS, with its Disney+ and Hulu services, were off 5.3% and streaming-device maker Roku ROKU down 7.2%.
How are other assets trading?
- The ICE U.S. Dollar Index DXY, -0.09%, a measure of the currency against a basket of six major rivals, was down 0.2% but up 0.4% on the week.
- Gold futures GC00, -0.69% fell 0.5% to $1,833.50 an ounce and crude-oil prices continued to pullback from 7-year highs, with U.S. crude CL00 down 0.7% at $84,92 a barrel.
- The Stoxx Europe 600 SXXP, -1.84% fell 1.8% and booked a 1.4% weekly slide, while London’s FTSE 100 UKX, -1.20% closed 1.2% lower and posted a 0.7% drop for the week.
- The Shanghai Composite SHCOMP, -0.91% closed down 0.9% and ended barely in positive territory for the week; China’s CSI 300 000300, -0.92% closed off 0.9% but logged a 1.1% weekly advance, and Japan’s Nikkei 225 NIK, -0.90% fell 0.9%, with a 2.1% fall on the week.
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