Friday September 23rd


Dow futures tumble 400 points, stocks head for big losing week on fear the Fed is overdoing it

U.S. stock markets index futures were lower on Friday to close out another losing week as investors fear the Federal Reserve’s aggressive hiking campaign to fight inflation will lead to an economic downturn. Dow Jones Industrial Average futures fell by 383 points, or 1.3%, while S&P 500 futures slid 1.3%. Nasdaq 100 futures lost 1.5%. Friday is set to be the fourth negative session in a row for the major averages, with the Dow on track to take out its June closing low. The Fed on Wednesday enacted another super-sized rate hike of 75 basis points and indicated it would do another at its November meeting. Bond yields have soared this week following the Fed’s actions, with the 2-year and 10-year Treasury rates hitting highs not seen in over a decade. Stocks positioned to suffer the most in a recession have led this week’s losses with the Consumer Discretionary Select Sector SPDR Fund off by more than 5%. The Real Estate Select Sectors SPDR Fund is down by 6%. Goldman Sachs cut its year-end S&P 500 target because of rising rates, predicting at least 4% downside from here. Investors on Friday continued to assess whether the Fed’s recent moves signal a downturn ahead, with many believing or beginning to accept that a recession is in fact on the horizon. “Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude, and duration of a potential recession and investment strategies for that outlook,” wrote Goldman Sachs’ David Kostin in a note to clients. Major averages are on pace for their fifth decline in the last six weeks and on track close out the week with losses. The Dow has given up about 2.4% this week, while both the S&P and Nasdaq have fallen 3% and 3.3%, respectively. Costco was down in premarket trading Friday. Although the retailer posted fiscal fourth-quarter revenue and earnings that topped analysts’ expectations, it is seeing higher freight and labor costs. In other news, the pound hit a fresh more than three-decade low against the U.S. dollar after a new U.K. economic plan that included a slew of tax cuts rattled markets. Asia-Pacific shares fell on Friday as investors continue to weigh the Federal Reserve’s aggressive stance. In Australia, the S&P/ASX 200 fell to its lowest levels since July on its return to trade after a holiday on Thursday, then recovered some losses to close 1.87% down at 6,574.70. South Korea’s Kospi dipped 1.81% to 2,290. Hong Kong’s Hang Seng index lost 1.18% in the final hour of trade. Mainland China stocks were also lower, with the Shanghai Composite shedding 0.66% to 3,088.25 and the Shenzhen Component losing 0.972% to 11,006.41. Oil prices fell on Friday as demand fears were stoked by rising interest rates and a stronger dollar, though losses were capped by Moscow’s mobilization campaign in its war with Ukraine and apparent deadlock in talks on reviving the Iran nuclear deal. Brent crude futures fell $2.81, or 3.11%, to $87.65 a barrel. U.S. West Texas Intermediate (WTI) crude futures were also down, retreating by $2.93, or 3.51%, to $80.56. Front-month Brent and WTI contracts were down 4.03% and 5.37% respectively over the past week. Gold prices dropped more than 1% to their lowest since April 2020 on Friday as a cocktail of factors from a robust dollar and elevated U.S. bond yields to worries around more U.S. interest rate hikes diminished bullion’s appeal. Spot gold was down 1.7% at $1,642.79 per ounce and was heading for its second straight weekly decline, down 1.8%. U.S. gold futures fell 0.5% to $1,672.10.