Wall Street concluded its second consecutive week of losses on Friday, relinquishing some of the gains that propelled the stock market to a record high earlier in the week.
The S&P 500 dipped 0.6%, marking its third consecutive decline. Despite reaching a record high on Tuesday, the benchmark index fluctuated in the following days. The Dow Jones Industrial Average also fell by 0.5%, while the Nasdaq Composite retreated by 1%.
Technology stocks weighed heavily on the market, with software maker Adobe experiencing a significant 13.7% drop after issuing a disappointing revenue forecast. Other tech giants like Microsoft and Broadcom also recorded losses of 2.1% each.
Communication services stocks also contributed to the market’s downturn, with Meta Platforms and Google parent Alphabet both experiencing declines of 1.6% and 1.3%, respectively.
In summary, the S&P 500 decreased by 33.39 points to 5,117.09, the Dow dropped by 190.89 points to 38,714.77, and the Nasdaq gave up 155.36 points to close at 15,973.17.
The recent decline in stocks coincided with reports indicating that while inflation is cooling down overall, it remains persistent.
A closely monitored report from the University of Michigan revealed an unexpected decline in consumer sentiment in March. Although consumers are slightly less optimistic about the economy, they still anticipate further decreases in inflation, suggesting that consumer prices may stabilize. Inflation remains a major concern for Wall Street, with hopes pinned on the Federal Reserve initiating interest rate cuts. The Fed had aggressively raised interest rates since 2022 to curb inflation, which peaked at 9.1% in 2022.
Recent reports on consumer prices showed that inflation remained stubborn, inching up to 3.2% in February from 3.1% in January. Another report on wholesale prices also indicated that inflation remains higher than anticipated.
Despite these inflation concerns, other economic reports indicated some softening in the economy, fostering hopes for sustained long-term inflation relief.
The stock market rally that commenced in October has essentially stalled in March as investors grapple with uncertainties surrounding inflation, Fed policy, and economic trajectory.
Brian Nick, senior investment strategist at the Macro Institute, summarized the sentiment, stating, “You can kind of look in either direction and find a reason to be concerned about equities.”
Investors continue to grapple with the lingering effects of the Federal Reserve’s unprecedented rate hikes, which could potentially slow down the broader economy and even lead to a recession, according to Brian Nick, senior investment strategist at the Macro Institute.
Nick emphasized that the impact of policy changes takes time to manifest, and investors may not fully appreciate the extent of the downward pressure exerted by policy lag.
The Federal Reserve is set to unveil its latest interest rate forecasts on Wednesday following its policy meeting. While traders are leaning toward a rate cut in June, the Fed’s main rate remains at its highest level since 2001.
Since July 2023, the central bank has kept the benchmark rate steady, signaling expectations for three rate cuts in 2024. Lower rates could alleviate pressure on the economy and financial system.
In the bond market, yields saw a slight increase, with the yield on the 10-year Treasury rising to 4.31% from 4.29% and the yield on the two-year Treasury rising to 4.73% from 4.69%.
Several companies faced downward pressure due to weak financial forecasts. Ulta Beauty, a beauty products retailer, saw its stock fall by 5.2% after providing a disappointing earnings outlook for the year. Similarly, electronics maker Jabil witnessed a significant slump of 16.5% after revising its revenue forecast downwards for the year.
Market performance was mixed in Europe, while Asian markets experienced declines.