Market Snapshot: S&P 500, Nasdaq tumble as U.S. Treasury yields soar, options expire

U.S. stocks fell sharply in the final hour of trading, with major benchmarks posting weekly losses, snapping a four-week winning streak as investors digested more hawkish comments from the Fed and more than $2 trillion in stocks – The linked option has expired.

How is the stock trading going?

• Dow Jones Industrial Average Dow -0.86% fell 281 points, or 0.8 percent, to close at nearly 33,718.
• S&P 500 SPX, -1.29% fell 53 points, or 1.3%, to 4,230. NASDAQ Composite, -2.01% fell nearly 251 points, or 1.9 percent, to 12,714.

For the week, the Dow is on track to drop 0.1%, while S&P 500 FactSet data show , the index will fall 1.2%, the Nasdaq is expected to fall 2.6%.

What drives the market?

U.S. stocks fell on Friday afternoon as investors assessed a surge in U.S. Treasury yields and the prospect that the Federal Reserve could stick to aggressive monetary policy tightening amid a fight against high inflation.

Co-CEO Keith Lerner says now is the time to cut back on equities after a recent “huge” rally in U.S. stocks and “central banks are tightening policy” Timing Investment Officer at Truist Advisory Services.

“The valuation is pretty high after the rebound,” Lerner said in a phone interview Friday. The S&P 500’s trading range of 4,200 to 4,300 at this time is “less favorable” from a “risk-reward” perspective, he said, noting that Friday’s rise in U.S. Treasury yields hurt growth stocks in particular.

S&P 500 Consumer Discretionary SP500.25, -2.10% , Communication Service SP500.50, -1.83% and Information Technology SP500.45, -1.83% sector was one of the hardest hit in Friday afternoon trading, FactSet data showed, last checked. In addition to growth stocks, the financial sector SP500.40, -2.02% is also falling , which Lerner attributed to fears that raising interest rates by the Federal Reserve to curb high inflation would lead to an “economic slowdown.”

Please refer to : The S&P 500’s earnings rose simply because of the strength of the sector

10-year Treasury TMUBMUSD10Y yield, 2.973% Friday rose 10.8 basis points to 2.987%, according to Dow Jones Market Data, It was the highest level since 3 p.m. ET on July 20. “It’s a strong move,” Lerner said, adding that the 2-year Treasury yield, TMUBMUSD02Y, 3.238% also rose amid expectations of further rate hikes.

Meanwhile, inflation in Europe, including Germany, is a reminder that “the job of global central banks is not done,” according to Lerner, pointing to Friday’s report of a sharp rise in German producer prices. The gains affect U.S. investors’ concerns about high inflation and rising interest rates.

In the U.S., investors are evaluating the possibility that the Federal Reserve may raise interest rates. Cut the benchmark rate by 75% at its September meeting

St. St. Louis Fed President Bullard told the Wall Street Journal on Thursday that he would be “inclined” to raise rates by 75 basis points in September. According to Bloomberg, Richmond Federal Reserve President Tom Barkin said on Friday morning that the central bank “will do everything in its power” to push inflation back to its 2 percent target, while Reuters reported that Barkin said the Fed’s efforts need not be “catastrophic.”

Rate-sensitive tech stocks have been battered this week, with the Nasdaq down 2.7% for the week, according to FactSet data. The S&P 500 is down 1.3% so far this week, while the blue-chip Dow Jones Industrial Average The average fell 0.3%.

That would mark a pause in the stock market’s recent rally. Last week, the S&P 500 and the tech-heavy Nasdaq posted fourth straight weekly gains Both recorded their longest weekly gain since November 2021.

See : Stock market rally faces key challenge on S&P 500’s 200-day moving average

The lack of major U.S. economic data on Friday left investors digesting comments from Fed officials while dealing with more than $2 trillion worth of stock and index options expiring each month that Lerner said would exaggerate market moves.

read: Analysts said Friday’s $2.3 trillion in options expiry could remove an important path to support stocks

Next week, investors will turn their attention to the Fed chair Jerome Powell will take action at the Fed’s annual economic symposium in Jackson Hole, Wyoming.

“I think everyone is waiting for Jackson Hole, so I think for There’s a lot of speculation about what Powell will say in the next five days,” said Brad Conger, deputy chief investment officer at Pennsylvania-based Hirtle Callaghan & Co., which manages about $20 billion in assets and mostly represents university endowments.

Look: Powell tells Jackson Hole that recession won’t stop Fed from fighting high inflation

Which companies are on the lookout?

• Bed, Bath & Beyond Inc. BBBY, -40.54% Shares rose after investor Ryan Cohen confirmed he sold his entire stake in the retailer for a profit of more than $58 million plunged about 44%. Shares of Deere & Co. German, +0.45% edged up 0.1% after the tractor maker reported lower fiscal third-quarter profits due to higher costs and production inefficiencies beat expectations, but its revenue beat expectations. Foot Locker Inc . FL, +20.04% jumped over 21%, boosted by the sneaker retailer’s second-quarter results.
  Weber Inc. WEBR, -11.50% shares surged above $10 a share a day earlier, down 9.6% for the first time since June.

How about other asset transactions?

• USD Index DXY, + 0.57%,, a gauge of the greenback’s strength against a basket of currencies, rose 0.5%. Oil futures closed slightly higher on Friday, with WTI CL.1, -0.51% Crude oil prices for September delivery rose 0.3 percent to settle at $90.77 a barrel. For the week, the front-month price of crude oil fell 1.4%.
  Gold prices closed lower on Friday, December futures prices for precious metals GCZ22 -0.58% fell 0.5% to settle at $1,762.90 an ounce. That brought gold’s weekly loss to 2.9%, according to Dow Jones Market Data.

Bitcoin BTCUSD, -9.34% fell 8.7% to $21,383. Among European stocks, the STOXX Europe 600 SXXP, -0.77% closed down 0.8% on Friday, a weekly loss 0.8%. London FTSE 100 UKX, +0.11% rose 0.1% on Friday and was up 0.7% for the week. In Asia, Japan’s Nikkei 225 NIK, -0.04% closed down less than 0.1% on Friday, up 1.3 for the week %. China Shanghai Composite Index SHCOMP, -0.59% fell 0.6% on Friday, bringing its weekly loss to 0.6%. Hong Kong Hang Seng Index Hang Seng Index, +0.05% rose less than 0.1% on Friday and lost 2% for the week.

—Barbara Kollmeyer contributed to this report.