NEW YORK, Oct 14 (Reuters) – U.S. stocks fell on Friday as deteriorating inflation expectations kept fears intact that the Federal Reserve’s aggressive rate hike path could trigger a recession, while investors were digesting the first stages of the results season.
In the latest session of a volatile week, stocks opened higher then reversed after data from the University of Michigan showed consumer sentiment improved in October, but inflation expectations worsened with rising gasoline prices. Retail sales data also indicated consumer resilience.
“The main push in the market right now is higher interest rates, higher inflation and the Fed is going to keep raising its fed funds target,” said Anthony Saglimbene, chief market strategist at Ameriprise. Financial in Troy, Michigan.
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“The narrative that we’ve seen a spike in inflation is not yet clear and that’s depressing the market.”
On Thursday, a reading of consumer prices (CPI) showed that inflation remained stubbornly high.
Fed officials were largely in sync when commenting on the need to raise rates and St. Louis Fed President James Bullard said in an interview with Reuters recent CPI data warrants continued “frontloading” in three-quarters-percentage-point bigger steps, though that doesn’t necessarily mean rates need to be raised above the bank’s most recent projections central.
The Dow Jones Industrial Average (.DJI) fell 403.89 points, or 1.34%, to 29,634.83, the S&P 500 (.SPX) lost 86.84 points, or 2.37%, to 3,583.07 and the Nasdaq Composite (.IXIC) fell 327.76 points, or 3.08%, to 10,321.39.
Friday’s decline marked the 37th time the S&P 500 has recorded a gain or loss of at least 2%, down from just seven such sessions in 2021. For the week, the Dow Jones gained 1.15% , the S&P 500 lost 1.56% and the Nasdaq fell. 3.11%.
Corporate earnings season has started to gain momentum and has helped the banking index (.SPXBK)which posted a narrow gain of 0.03% after JPMorgan Chase & Co’s quarterly results (JPM.N)up 1.66%, Citigroup Inc (NC)up 0.65%, and Wells Fargo & Co (WFC.N)up 1.86%, boosted everyone’s shares.
“The message I got from them is that things are looking pretty good from an economic perspective despite the challenges, but they have increased loan loss reserves just in anticipation of further downturn,” said Brian Jacobsen, senior investment strategist at Allspring. Global Investments in Menomonee Falls, Wisconsin.
UnitedHealth gained 0.63% as one of only three components of the Dow Jones to rise the day after the health insurer posted better-than-expected quarterly results while increasing its annual forecast.
Analysts now expect third-quarter earnings for S&P 500 companies to have risen just 3.6% from a year ago, much less than the 11.1% rise expected at the start. July, according to Refinitiv data.
Kroger Co. (KR.N) shares fell 7.32% after the supermarket chain announced it want to buy small rival Albertsons Companies Inc (ACI.N) in a $24.6 billion deal.
Tesla Inc. (TSLA.O) fell 7.55% following media reports that the electric vehicle maker suspended plans to start production of battery cells at its plant outside Berlin due to problems techniques.
Volume on U.S. exchanges was 10.88 billion shares, compared to an average of 11.48 billion for the full session over the past 20 trading days.
Falling issues outnumbered rising ones on the NYSE by a ratio of 4.20 to 1; on the Nasdaq, a ratio of 2.87 to 1 favored the decliners.
The S&P 500 posted 5 new 52-week highs and 7 new lows; the Nasdaq Composite recorded 71 new highs and 235 new lows.
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Additional reporting by Herbert Lash and Noel Randewich; Editing by Chizu Nomiyama and David Gregorio
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