Pressure on financial markets continues to come from growing expectations of a rapid tightening of monetary policy by the Federal Reserve System (Fed), worsening the mood of investors, already worried about the ongoing acceleration of inflation and the situation with COVID-19 in China. Traders are increasingly afraid that the Fed's cycle of raising the base interest rate could lead to a recession in the US economy.
Fed Chairman Jerome Powell, speaking Thursday at an event during the spring meetings of the International Monetary Fund and the World Bank, said that the Fed may need to move a little faster with a rate hike.
It was Powell's last public appearance before the next meeting of the Federal Open Market Committee (FOMC) on May 3-4. On the previous FOMC raised the rate by 25 basis points (bp) to 0.25-0.5%. At the same time, the last time the Fed raised the rate at two meetings in a row was in 2006, and the rise by 50 bp at once. hasn't been since 2000.
Judging by the rate futures, the market is almost certain that the Fed will increase the cost of borrowing by at least 50 bp. at each of the next two meetings - in May and June. At the same time, traders estimate the probability of raising the base interest rate by 75 bp at once at 94%. in June, according to data from CME Group Inc.
The two-year US Treasuries yielded 2.71% on Friday, the highest since December 2018.
Traders continue to follow the quarterly reports of companies, which are generally quite favorable. In the case of S&P 500 companies that have already reported for the past quarter, total earnings per share turned out to be 8.2% better than experts' forecast, according to Credit Suisse data. The performance of about 75% of companies exceeded market expectations. However, analysts fear that companies' results will worsen in the near future due to higher rates.
The Dow Jones Industrial Average fell by 981.36 points (2.82%) by the close of the market on Friday to 33,811.4 points.
Standard & Poor''s 500 fell 121.88 points (2.77%) to 4271.78 points.
The Nasdaq Composite dropped 335.36 points or 2.55% to 12839.29 points.
At the end of the week Dow Jones lost 3.9%, S&P 500 - 2.7%, Nasdaq Composite - 1.9%.
Shares of American Express Co. lost 2.8% in price on Friday, despite the fact that the quarterly report of the company, which is one of the leaders in the US plastic card market, was better than market forecasts.
The price of securities of the gold mining company Newmont Corp. fell by 3.3%. Newmont's first-quarter net income and revenue came in below market expectations due to the company's rapidly rising costs.
Share price of Verizon Communications Inc. decreased by 5.6%. The US telecom operator's adjusted earnings for the last quarter came in slightly better than the market's forecast, while revenue fell slightly short of expectations.
The price of Gap Inc. papers. collapsed by 18%. The clothing company has announced the resignation of Nancy Green as president and CEO of the Old Navy brand. In addition, Gap said it expects a larger drop in sales in the first fiscal quarter than previously thought.
Kimberly-Clark Corp stock quotes and Schlumberger Ltd., which posted strong first-quarter results, rose 8.1% and 2.5%, respectively.