Stocks slid Friday, just one day after a historic turnaround rally, after investors took in the latest CPI report.
The S&P 500 dropped 2.37% to 3,583.07 for its eighth negative close in eight days. The Dow Jones Industrial Average fell 1.34%, dropping 403.89 points to 29,634.83. Meanwhile the Nasdaq Composite dropped 3.08%, ending at 10,321.39, dragged down by Tesla and Lucid Motors, which lost 7.55% and 8.61% respectively.
The S&P 500 and the Nasdaq were down 1.55% and 3.11%, respectively for the week, while the Dow managed to close up 1.15% for the week.
Stocks slid after a metric the Fed would watch closely, a consumer survey from the University of Michigan, showed consumer expectations of inflation were increasing. The Nasdaq led the drop, due to the sensitivity of growth companies to interest rate hikes.
As that survey was being digested, bond yields jumped as the rate on the 10-year Treasury rose over 4% for the second time in two days on inflation expectations.
The market continues to be weighed down by persistent inflation, and fears over the effects of the Fed’s efforts to contain it. The September Consumer Price Index came in hotter than expected, initially weighing on markets with fears of the Fed’s response, before investors shrugged it off.
UBS global wealth management chief investment officer Mark Haefele wrote in a Friday note, “With core CPI still moving in the wrong direction and the labor market strong, the conditions are not in place for a Fed policy pivot, which would be one of the conditions for a sustained rally in the equity market.”
He added, “Moreover, as inflation remains elevated for longer and the Fed hikes further, the risk increases that the cumulative effect of policy tightening pushes the US economy into recession, undermining the outlook for corporate earnings.”
