S&P 500, Nasdaq eye weekly loss as rate-hike worries hit growth stocks

The S&P 500 and the Nasdaq on Friday were set for their first weekly loss after four weeks of gains as worries over interest rate hikes sapped risk appetite and dragged the megacap growth and technology stocks sharply lower.

The blue-chip Dow was set to post slim weekly gains, with stocks struggling to advance this week as initial hope that inflation had peaked gave way to doubts following the Federal Reserve’s minutes from July meeting.

The market expectation of a less aggressive rate hike was dampened as the minutes did not provide a clear hint at the pace of rate increases and showed policymakers committed to raising rates.

“Today was the day that the bullish investors just didn’t have the muscle to keep pushing the game higher and that happens at some point – optimism fades and the bears get a bite at the apple,” said Mike Zigmont, head of trading & research at Harvest Volatility Management.

High-growth and technology stocks such as Amazon.com Inc and Alphabet Inc fell over 2% as US Treasury bond yields rose, mimicking European bonds as Germany posted a record-high increase in monthly producer prices.

The benchmark 10-year US Treasury yield climbed to near a one-month high at 2.978%.

Banks fell 2.3% and were set to end the week lower, potentially snapping their six-week winning streak.

“Lot of individual not-so-great news here today and it’s just manifesting in an overall market selloff,” said Dennis Dick, a retail trader at Triple D Trading, pointing to profit miss by Deere & Co, inflation in Germany and a selloff in meme stocks and cryptocurrencies.

At 12:26 p.m. ET, the Dow Jones Industrial Average was down 231.33 points, or 0.68%, at 33 767.71, the S&P 500 was down 49.57 points, or 1.16%, at 4 234.17, and the Nasdaq Composite was down 247.57 points, or 1.91%, at 12 717.78.

Meanwhile, Richmond Federal Reserve President Thomas Barkin said on Friday that the Fed’s efforts to control inflation could lead to a recession, but it needn’t be “calamitous”.

St. Louis Fed President James Bullard said on Thursday he was in favor of a third straight 75 basis-point rate hike in September, while his San Francisco Fed colleague Mary Daly said a 50 or 75 basis-point hike next month would be “reasonable”.

The Fed has raised its benchmark overnight interest rate by 225 bps since March to fight four decade-high inflation.

Focus next week will be on Fed Chair Jerome Powell’s speech on the economic outlook at the annual global central bankers’ conference in Jackson Hole, Wyoming.

Friday’s monthly options expiration should also make way for greater near-term stock market moves, as a lot of options dealer positions, which may have been acting to suppress index volatility, expires, analysts said.

Cryptocurrency and blockchain-related stocks dropped following a sudden selloff in bitcoin, with crypto exchange Coinbase Global and miner Marathon Digital down 9.6% and 14.1%, respectively.

Meme stock Bed Bath & Beyond Inc plunged 35.2% as billionaire investor Ryan Cohen exited the struggling home goods retailer by selling his stake.

General Motors Co rose 2.1% after it said it would reinstate quarterly dividend payouts.

Declining issues outnumbered advancers for a 6.85-to-1 ratio on the NYSE and a 4.45-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 29 new lows, while the Nasdaq recorded 26 new highs and 75 new lows.