U.S. stocks dropped on Friday as worsening inflation expectations kept intact worries that the Federal Reserve's aggressive rate hike path could lead to an economic recession, while investors digested the early stages of earnings season.
In what has been a volatile week for stocks, equities opened higher before reversing course after data from he University of Michigan showed consumer sentiment improved in October but inflation expectations worsened as gas prices moved higher. Retail sales data also indicated resilience among consumers.
"You get that University of Michigan data to say that maybe we are going to see those inflation expectations rising, and the Fed really wants to front-run inflation expectations, they understand monetary policy doesn’t operate mechanically, it operates more psychologically through expectations, so they want to make sure those expectations stay firmly planted around 2% to 2.5%," said Brian Jacobsen, senior investment strategist at Allspring Global Investments in Menomonee Falls, Wisconsin.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The data came a day after a reading on consumer prices showed inflation remains stubbornly high.
The Dow Jones Industrial Average fell 398.96 points, or 1.33%, to 29,639.76, the S&P 500 lost 80.64 points, or 2.20%, to 3,589.27 and the Nasdaq Composite dropped 288.66 points, or 2.71%, to 10,360.49.
Corporate earnings season started to pick up steam, helping lift banks, up 0.16%, to be among the few bright spots on the session after quarterly results from JPMorgan Chase & Co, which gained 2.12%, Citigroup Inc, up 0.76%, and Wells Fargo & Co, which rose 2.65%.
"The message I got from them is things are looking pretty good from an economic perspective despite the challenges but they increased loan-loss reserves just in anticipation that you are going to see some more slowing," said Jacobsen.
UnitedHealth gained 0.71% as one of the few Dow components to move higher on the session after the health insurer posted better-than-expected quarterly results while raising its annual forecast.
Analysts now expect third-quarter profits for S&P 500 companies to have risen just 3.6% from a year ago, much lower than an 11.1% increase expected at the start of July, according to Refinitiv data.
The Dow was on track to close out the week with a gain while the S&P 500 and Nasdaq were poised for weekly declines.
Kroger Co dropped 8.01% after the supermarket chain said it would buy smaller rival Albertsons Companies Inc in a $24.6 billion deal.
Tesla Inc slumped 6.18% following media reports that the electric vehicle maker has put on hold plans to launch battery cell production at its plant outside Berlin due to technical issues.
Investors also monitored UK politics after British Prime Minister Liz Truss fired her finance minister Kwasi Kwarteng and scrapped parts of their economic package in a desperate bid to stay in power and survive the market and political turmoil.
Declining issues outnumbered advancing ones on the NYSE by a 4.18-to-1 ratio; on Nasdaq, a 2.91-to-1 ratio favored decliners.
The S&P 500 posted 5 new 52-week highs and 5 new lows; the Nasdaq Composite recorded 56 new highs and 171 new lows.
(Reuters Reporting by Chuck Mikolajczak; Editing by Chizu Nomiyama)
To read more daily investing news, subscribe to our Closing Bell e-newsletter.
-
6 Stunning Waterfront Homes for Sale Around the USFrom private peninsulas to lakes, bayous and beyond, Kiplinger's "Listed" series brings you another selection of dream homes for sale on the waterfront.
-
Six Reasons to Disinherit Someone and How to Do ItWhether you're navigating a second marriage, dealing with an estranged relative or leaving your assets to charity, there are reasons to disinherit someone. Here's how.
-
Stock Market Today: Stocks Surge to Close a Volatile WeekIt was another day with a week's worth of both news and price action, but it ended on a strongly positive note.
-
Stock Market Today: Uncertainty Proliferates: Dow Loses 1,014 PointsWeaker-than-expected consumer inflation data wasn't enough to stabilize sentiment during another volatile day for financial markets.
-
Stock Market Today: Tariff Pause Triggers 3,000-Point Dow RallyThe bond market is sending concerning signals as the Trump administration executes its rapid reordering of global trade relationships.
-
Stock Market Today: Tariff Talks Drive Another Up-and-Down DayTrade war negotiations are happening, but the "fear gauge" is gyrating, and investors, traders and speculators are still searching for signs of a bottom.
-
Stock Market Today: Trump Pushes Dow Into 2,600-Point SwingTariffs and trade war weigh on prices across global financial markets, with little light at the end of the tunnel.
-
Stock Market Today: Dow Drops Another 2,231 Points to Hit a CorrectionThe Nasdaq Composite, meanwhile, entered a new bear market with its latest slide.
-
Stock Market Today: Dow Dives 1,679 Points on Trump Tariff ShockU.S. stocks lost roughly $3.1 trillion in market cap on Thursday – the biggest one-day decline since the start of the COVID-19 pandemic in March 2020.
-
Stock Market Today: It's the Old Up-Down Again on Liberation DayMarkets look forward to what comes with the reordering of 80-year-old global trade relationships.
