Stocks give way to a rally and end lower as volatility continues | Lifestyles

Markets are still processing the latest indications from the Federal Reserve a day earlier that the central bank is increasingly worried about inflation and plans to raise interest rates and take other steps to as soon as possible to fight it. Investors were encouraged to see strong numbers for US economic growth, which showed the largest increase in GDP last year since 1984.

The S&P 500 fell 0.5%. The benchmark index rose as much as 1.8% in the early part of the going. The Dow Jones Industrial Average dropped less than 0.1% and the Nasdaq gave up 1.4%. The company’s smaller stocks fell more than the broader market, sending the Russell 2000 index 2.3% lower.

Stocks have been on a roller-coaster ride throughout the week as investors try to fit the idea of ​​raising interest rates after the Fed’s policy of near zero rates helped raise stock prices in for nearly two years.

“I like to define it as healthy whiplash,” said Jason Pride, chief private wealth investment officer in Glenmede. “The market sees the change in the terrain and it is adaptable to the adjustment; the land will have higher interest rates. “

The S&P 500 fell 23.42 points to 4,326.51, its third consecutive decline. The index has gained just five days so far in January. It is within 10 points of entering the “correction,” meaning a 10% drop from its high set on Jan. 3.

The Dow fell 7.31 points to 34,160.78. The Nasdaq dropped 189.34 points to 13,352.78. Russell 2000 fell by 45.18 points to 1,931.29.

Consumer spending -dependent companies and banks are among the biggest weights in the S&P 500. Royal Caribbean fell 6.3% and JPMorgan Chase fell 1.8%.

Technology stocks have also lost ground. The sector has become the main driver for the broader market swing as investors move money in hopes of higher interest rates. Expensive tech companies and other growth stocks are considered less attractive when interest rates rise. Nvidia fell 3.6%.

Energy and communications stocks made solid gains on Thursday. Chevron rose 2% and Netflix jumped 7.5%.

Bond yields have fallen. The yield on the 10-year Treasury fell to 1.80% from 1.84% late Wednesday.

The U.S. economy expanded by 5.7% in 2021, the strongest growth of the calendar year since a 7.2% surge in 1984 after the previous recession. It ended the year by growing at an unexpectedly fast 6.9% annual pace from October to December as businesses replenished their inventories, the Commerce Department reported.

The upbeat report comes a day after the Federal Reserve raised some concerns about how quickly it will ease support for markets and the economy. It said it was “expected to be appropriate soon” to raise interest rates, and investors expected the first in a series of rate increases to happen in March. The Fed also said it would cut monthly bond purchases, intended to lower longer -term rates, in March.

The Fed is monitoring the impact of inflation on businesses and consumers and Fed Chair Jerome Powell acknowledged that the pressure is not dropping. That could mean the central bank needs to take a more aggressive approach to raising interest rates and removing the support it has placed for the markets.

Businesses from a wide range of industries have been warning investors for months that supply chain problems and higher raw material costs have damaged operations. Higher prices passed on to consumers could spur spending retreat and hurt economic growth.

Investors closely monitor the latest round of company earnings to gauge how many companies are hurting by inflation and how they expect it to affect them going forward.

The technology sector has been particularly affected by supply chain problems with long -standing computer chip shortages. Semiconductor equipment maker Lam Research fell 6.9% after saying supply chain issues worsened in December. Chipmaker Intel fell 7% after giving investors a poor earnings forecast.

The chip shortage continues to be detrimental to the automotive industry. Tesla fell 11.6% after telling investors that the shortfall would prevent the company from launching new models in 2022.

Solid earnings have helped push shares for many other companies higher. ServiceNow rose 9.1% after software maker that automates the company’s technology operations reported good financial results. Electronic storage maker Seagate Technology rose 7.7% and jeans maker Levi Strauss rose 8.4% after also reporting encouraging financial results.

Each major index is in red for the year. The S&P 500 was down 9.2%. The collapse is having an impact on initial public offerings after a record 2021, said Matthew Kennedy, senior IPO market strategist at Renaissance Capital.

Three large companies stopped their IPOs after setting a suggested price, he said, compared to a postponement in January 2021. Many smaller deals have delayed their offers.

“The current market volatility makes it almost impossible to make deals,” he said.

He also said the change in Fed policy has scared investors, especially for growth stocks, where even a few rate increases could have an impact on the value of future cash flows. He added that the reset for the IPO market could be healthy in the long run and part of the natural market cycle.