By Christine Idzelis and Joseph Adinolfi
U.S. stocks closed sharply lower Friday, with the Dow Jones Industrial Average ending at its lowest closing value since November 2020. All three major benchmarks suffered another week of losses as bond yields rose in the wake of the Federal Reserve’s interest rate hike on Wednesday.
How stock indexes traded
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.0047% shed 486.27 points, or 1.6%, to close at 29,590.41.
The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.19% dropped 64.76 points, or 1.7%, to finish at 3,693.23.
The Nasdaq Composite slid 198.88 points, or 1.8%, to end at 10,867.93.
For the week, the Dow dropped 4% while the S&P 500 slid 4.6% and the Nasdaq tumbled 5.1%, according to Dow Jones Market Data. All three major indexes declined for a second straight week.
What drove markets
U.S. stocks fell sharply Friday as market volatility climbed in the wake of the Federal Reserve delivering a third straight, jumbo interest-rate hike of three quarters of a percentage point on Wednesday.
“Recession risks have increased and no one wants to be the last one out squeezing out through the door,” said Russell Evans, managing principal and chief investment officer at Avitas Wealth Management, in a phone interview Friday. “The market is rushing to get ahead of what the market sees as being inevitable.”
Investors are worried that the prospect of a so-called soft landing for the U.S. economy is diminishing as the central bank keeps up its aggressive pace of tightening monetary policy in an effort to fight high inflation. After on Wednesday announcing its latest large rate hike, Fed Chair Jerome Powell warned again that its job is not done.
“People interpreted this week’s action and rhetoric as more hawkish,” said Evans.
The S&P 500 finished Friday up 0.7% from its 2022 closing low of 3666.77 on June 16, while the Dow carved out a new trough this year by ending at its lowest closing value since Nov. 20, 2020, according to Dow Jones Market Data.
Treasury yields have surged since the Fed’s policy rate decision was announced Wednesday, putting pressure on the stock market.
The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.66% dipped one basis point Friday to end at 3.695%, after surging Thursday to its highest rate since February 2011 based on 3 p.m. Eastern time levels, according to Dow Jones Market Data.
Meanwhile, the 2-year Treasury yield /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +0.48% climbed 8.8 basis points Friday to 4.212%, to its highest level since Oct. 12, 2007.
“The price action has been really, really chaotic this entire week, and it’s mostly been driven, in my view, by the bond market,” said Mike Antonelli, a market strategist at Baird.