By Noël Randewich
(Reuters) – The S&P 500 closed lower on Friday, weighed down by Microsoft and Nvidia as investors feared inflation and a strong US economy could prime the Federal Reserve for more rate hikes.
Wall Street’s seesaw this week followed economic data pointing to higher inflation, a tight labor market and resilience in consumer spending, giving the Fed more leeway to raise borrowing costs.
Goldman Sachs and Bank of America forecast three more rate hikes this year, each up a quarter of a point from their previous estimate of two hikes.
Traders expect at least two more rate hikes and expect the Fed rate to peak at 5.3% by July as the central bank tries to cool the economy and lower inflation.
“For the past two weeks, a dark cloud has rolled over the stock market based on a higher water mark for the Fed’s interest rates,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.
“Employment numbers are not weakening and it is difficult to enter a recession at the same time as a strong labor market. That means the Fed could hit the button and hike rates,” Dollarhide said.
Microsoft Corp fell 1.6% and Nvidia 2.8%, both of which weighed on the S&P 500 as the 10-year Treasury note yield hit a three-month high. [US/]
The CBOE volatility index, also known as Wall Street’s fear gauge, traded above 20 points for the second straight day.
Of the 11 sector indices that make up the S&P 500, six, led by consumer staples, rose 1.29%, followed by a 1% gain in utilities. Energy fell 3.65%, Exxon Mobil lost 3.8%.
The S&P 500 fell 0.28% to end the session at 4,079.09 points.
The Nasdaq fell 0.58% to 11,787.27 points, while the Dow Jones Industrial Average rose 0.39% to 33,826.69 points.
For the week, the S&P 500 fell 0.3%, the Dow lost 0.1% and the Nasdaq rose 0.6%.
The S&P 500 is up about 6% so far in 2023, while the Nasdaq has rallied about 13% after deep losses last year.
Adding to recent concerns about monetary policy, Fed Governor Michelle Bowman said the central bank needs to keep raising interest rates until it makes much more progress on fighting inflation. Richmond Fed President Thomas Barkin said the central bank has yet to hike rates but could stick with hikes of a quarter point.
Moderna Inc fell 3.3% after its experimental messenger RNA-based influenza vaccine yielded mixed results in a study.
Deere & Co rose 7.5% after the world’s largest farm equipment maker increased its full-year profit and beat quarterly profit expectations.
Lithium miners Livent Corp, Albemarle Corp and Piedmont Lithium Inc fell between 10% and 12% on concerns over weakness in Chinese prices for the electric vehicle battery metal.
The most traded company on the S&P 500 was Tesla Inc, with $42.9 billion worth of shares swapped during the session. The stock rose 3.10%.
The US stock exchanges will remain closed on Monday for Presidents’ Day.
Rising issues dominated the S&P 500 by a ratio of 1.1 to one.
The S&P 500 posted eight new highs and one new low; The Nasdaq recorded 75 new highs and 68 new lows.
Volume on US exchanges was relatively light at 10.6 billion shares traded, compared to an average of 11.7 billion shares over the previous 20 sessions.
(Reporting by Johann M. Cherian and Sruthi Shankar in Bengaluru; Editing by Marguerita Choy)
