U.S. Stocks Tumble Amid Interest-Rate Hike Concerns

U.S. stocks closed lower on Friday, ending the three major indexes’ multi-month winning streak and posting their worst week since March 2023 when Silicon Valley Bank collapsed. The S&P 500 index was down 1.4% for the week, snapping a five-week winning streak and booking its largest weekly decline since March 10, 2023. The Dow industrials logged a weekly drop of 1.7%, while the Nasdaq fell 1.4%.

Weekly Performance of Key Indexes

  • The S&P 500 SPX, -0.77% fell 33.56 points, or 0.8%, to end at 4,348.33.
  • The Dow Jones Industrial Average DJIA, -0.65% dropped 219.28 points or 0.7%, to finish at 33,727.43.
  • The Nasdaq Composite COMP, -1.01% slid 138.09 points or 1%, ending at 13,492.52.

This four-day slide is the blue-chip gauge’s longest losing streak since a five-day drop that ended on May 25.

Investors Seek Safety in Bonds and U.S. Dollar

Investors sought safety in bonds and the U.S. dollar as a wave of interest-rate hikes and hawkish commentary from international central bankers revived worries about global economic growth.

Drivers of Market Performance

U.S. stocks finished lower as concerns mounted over interest-rate hikes by central banks that could harm global economic growth. On Thursday, rate hikes in the UK, Switzerland, Norway, and Turkey further fueled these worries among investors.

Deteriorating Global Growth Outlook Raises Concerns for U.S. Economy and Markets

Recent data releases raise concerns for the U.S. economy and global markets as growth outlook deteriorates due to central bank rate hikes. Although the Federal Reserve left interest rates on hold in June, Chair Jerome Powell indicated that senior Fed officials strongly support hiking rates “a couple of times” later this year. However, Richmond Fed President Tom Barkin isn’t as certain and wants to wait for the “haze to clear” before considering more rate hikes.

Meanwhile, global business activity in the eurozone is also losing momentum as confirmed by a purchasing managers survey. This slowdown is reflected in the S&P Global U.S. services index and manufacturing index, both of which fell to two-month and five-month lows in June, respectively.

As a result, U.S. stocks have dropped as markets anticipate the possibility of a sharper economic downturn – particularly for Europe – which could keep the dollar supported over the short-term. Ryan Belanger, founder of Claro Advisors, is among the analysts who believe the recent stock market rally was getting ahead of itself.

Overall, it’s important to keep a close eye on how the economic outlook evolves, as it will continue to impact markets in the foreseeable future.

The Market Seesaw

As the market comes off a continuous rally, economists are hesitant to declare this dip as an upcoming bear market. However, caution is advised. The technology-heavy Nasdaq has just completed its longest streak of gains since March 2019, and the S&P 500 had climbed for five straight weeks. Senior wealth manager and market strategist at Murphy & Sylvest Wealth Management, Paul Nolte, explains that a bit of giveback was expected with the recent parabolic market action.

Defensive assets like the dollar and high-quality sovereign bonds are leading as the more trusting stocks lose their appeal. Crude oil prices, which are sensitive to global economy expectations, fell 0.5%. Treasury Secretary Janet Yellen is more positive and states that recession risks in the U.S. have faded with inflation coming down and the labor market’s resilience. Nevertheless, people remain undeniably wary as news like this often causes apprehension among investors.

Markets Update: Bitcoin Hits One-Year High as Financial Heavyweights Enter the Ring

Bitcoin (BTCUSD) saw its highest level in a year after three major financial institutions filed applications for spot bitcoin exchange-traded funds. BlackRock, Invesco, and WisdomTree have entered the arena, giving additional legitimacy to the cryptocurrency. As of Friday afternoon, Bitcoin traded at $30,856, with an intraday high of $31,515.49 – the first time the currency traded above $31,000 since June 8, 2022.

Companies in Focus

Several companies made headlines on Friday:

3M Co. (MMM)

MMM shares rose by 0.3% after the materials and chemicals company set aside $10.3 billion to settle claims that it was responsible for “forever chemicals” in drinking water.

Virgin Galactic Holdings Inc. (SPCE)

Virgin Galactic’s shares fell by 18.4% after the space-tourism corporation said it is seeking to raise $400 million to scale up its business and improve its fleet.

Smith & Wesson Brands Inc. (SWBI)

SWBI jumped up 20.2% following impressive fiscal fourth-quarter results that exceeded expectations.

Starbucks Corp. (SBUX)

Starbucks finished the day lower, with shares down by 2.5%. Workers from over 150 stores plan to go on strike due to accusations that Starbucks banned Pride-themed decorations from some U.S. locations.

Remember that investing is a risky venture and investors should do their own research before making any investment decisions.

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