By Christine Idzelis and Mark DeCambre
U.S. stocks ended sharply lower Friday, with the Dow booking its worst week since October 2020, after comments from a Fed official exacerbated market volatility that followed the central bank’s updated outlook this week for inflation and the economic recovery from COVID.
Friday also marked quadruple witching day, which is the simultaneous expiration of single-stock options, single-stock futures, stock-index options and stock-index futures.
The U.S. government was closed on Friday after President Joseph Biden signed a bill Thursday making Juneteenth a national holiday commemorating the end of slavery in the U.S. Stock and bond markets remained open for business.
How did stock benchmarks trade?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.21% dropped 533.37 points, or 1.6%, to end at 33,290.08
The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.11% fell 55.41 points, or 1.3%, closing at 4,166.45.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.82% slid 130.97, or 0.9%, ending at 14,030.38.
On Thursday , the Dow closed down 210.22 points, or 0.6%, at 33,823.45, marking a four-day skid that was its longest since January. The S&P 500 edged down 1.84 points, or less than 0.1%, to 4,221.86. The Nasdaq Composite gained 121.67 points, or 0.9%, to 14,161.35.
For the week, the Dow declined 3.5%, its second weekly fall in a row and its steepest such drop since the week of Oct. 30, 2020. The Nasdaq saw a weekly loss of 0.3%, snapping its four-week winning streak. The S&P 500 shed 1.9% for the week, ending a three-week win streak.
What drove the market?
Blame it on quadruple witching or James Bullard as the market took a leg lower, rounding out a downbeat week where investors looked for guidance from interest rate setters at the Federal Reserve.
Just as investors were girding themselves for a Fed with perhaps less of an inclination to champion easy-money policies, St. Louis Federal Reserve President Bullard offered a fresh dose of hawkishness, saying Friday that he thinks the Fed should lift its benchmark interest rate as early as late 2022.
In an interview on CNBC, Bullard said it was “natural” for the Fed to tilt hawkish at its meeting earlier this week, given recent strong inflation readings, but he also pointed to an economy that he views as recovering strongly from the pandemic.
Bullard also said he was “leaning” toward supporting an end to the purchases of mortgage backed securities, given the “booming housing market” and with concerns mounting around a potential bubble in the sector. “I would be a little concerned about feeding into the housing froth that seems to be developing,” Bullard said.
Bullard’s comments followed statements earlier in the week from the Federal Open Market Committee and remarks by Fed Chairman Jerome Powell, which were viewed as setting the stage for a less accommodative stance by the central bank. Fed policy makers penciled in two rate increases by the end of 2023 and discussed the eventual tapering of the central bank’s asset buying program.
Growing expectations that the U.S. central bank will raise interest rates in 2023 has helped to pull equities down from record highs touched earlier this week by the S&P 500 and the Nasdaq Composite.