Stocks fell on Friday to close out a rough week for financial markets as interest rates and foreign currency turmoil heightened fears of a global recession.
The Dow Jones Industrial Average fell more than 700 points to fall below 30,000 for the year, a new low for the year. The 30 stock index fell 20% from its high, known as bear market territory on Wall Street. It was trading 603 points lower, or 2%, last trading on it. The S&P 500 fell 2.2% and headed for a new closing low in 2022, while the Nasdaq Composite fell about 2%.
Quincy Krosby, of LPL Financial, said the market has been moving quickly from worries over inflation to concerns over the aggressive Federal Reserve campaign. You see bond yields rising to levels we haven't seen in years - it is changing the mindset to how does the Fed get to price stability without anything breaking. The British pound hit a new three-decade low against the U.S. dollar after a new U.K. economic plan that included a slew of tax cuts rattled markets that are fearing inflation above all right now. Major European markets lost 2% on the day.
The market is trying to sort out a global macro mess, according to Krosby.
Friday was the fourth negative session in a row for the major averages. The Fed has acted another super-sized rate hike of 75 basis points, and indicated it will do another at its November meeting.
Following the Fed's actions, bond yields soared this week with the 2 year and 10 year Treasury rates hitting new highs not seen in over a decade.
The S&P 500 target was cut by Goldman Sachs because of rising rates and predicted 4% downside from there.
This week's losses led to the S&P 500's consumer discretionary sector being off by 7%, despite the stock positioned to suffer the most in a recession. Oil prices are down more than 9% and energy is down more than 9%. Growth stocks including the big tech names Apple, Amazon, Microsoft and Meta Platforms fell on Friday.
A majority of equity investors have adopted the view that a hard landing scenario is inevitable and that their focus is on the timing, magnitude, and duration of a potential recession and investment strategies for that outlook, wrote Goldman Sachs's David Kostin in a note to clients.
The major averages have lost their fifth decline in the last six weeks. The Dow has given up about 4.5% this week, while the S&P and Nasdaq have fallen 5.2% and 5.5%, respectively.