Wall Street started the second half of the year on a dull note on Friday because investors worried about the risks to economic growth from the Federal Reserve's resolve to curb rising prices at all costs.
As the era of cheap money draws to a close and a cycle of higher interest rates sets in, investors are selling equities, pushing the S&P 500 to close out its worst first six months since 1970 on Thursday.
The first half was really ugly. We'd like to settle down here, according to Joe Saluzzi, co-manager of trading at Themis Trading.
People are hoping we have a better second half, but the proof is going to be in the numbers and the first thing they are going to look for is how bad earnings are going to be. Manufacturing activity slowed more than expected in June, as the data showed that new orders shrank for the first time in two years.
Despite signs of slowing growth, the Fed policymakers have been making a case for a second 75 basis points interest rate hike in July, leaving investors assessing the potential impact on corporate earnings.
Investor confidence is evaporating right now. Kunal Sawhney, chief executive at research firm Kalkine said the Fed is saying they are going to raise interest rates and if they want inflation controlled, the economy will go through some pain in the short term and in the next six to 12 months.
The recession risks have intensified and there will be a lot of volatility in the second half of the year. The markets saw a turbulent first half as fears over big interest rate hikes, geopolitical uncertainty, prolonged supply-chain snarls and lock-downs in China weighed on sentiment.
All three indexes posted their second straight quarterly decline in the previous session. The Dow suffered its biggest first-half plunge since 1962, and the tech-heavy Nasdaq recorded its worst-ever first six months.
The big techs were smashed in the second quarter because of the higher yields. Saluzzi said that we would hope that there would be some sort of outperformance in the Nasdaq side with those lower yields.
The Dow Jones Industrial Average was down 114.85 points, or 0.37%, at 30,660, according to the Dow Jones Industrial Average. The S&P 500 was down 9.89 points, or 0.26%, at 3,775. 49, and the Nasdaq Composite was down 5.81 points, or 0.05%, at 11,022. Micron Technology Inc dropped 5.6% as the memory-chip firm predicted current-quarter revenue below market expectations, which triggered concerns that the chip sector was turning toward a down cycle. Meta Platforms Inc, a Facebook-owned company, fell 2.5%. The company has cut plans to hire at least 30% of its employees this year, CEO Mark Zuckerberg told employees, warning them to be prepared for a deep economic downturn. Kohl's Corp fell 20.9% as the department store chain called off its sale to Vitamin Shoppe-owner Franchise Group, blaming a downturn in market conditions.
Advancers outnumbered decliners by a 1.27 to 1 ratio on the NYSE and a 1.42 to 1 ratio on the Nasdaq.
The S&P index recorded a new 52 week high and 39 new lows while the Nasdaq recorded five new highs and 90 new lows.