The Dow Jones Industrial Average, which serves as Wall Street’s broadest equities indicator with stocks of 30 large US corporations, closed Friday’s trade down 282 points, or 0.9%, at 32,902. For the week, the Dow fell 1%, extending last week’s 2.8% decline. Cumulatively, the drop of nearly 4% was the biggest two-week slump since a 6% drop in mid-to-late September.
The S&P 500 Index, which represents the top 500 US stocks, fell 46 points, or 1.2%, on the day to finish at 3,850. On a weekly basis, the S&P fell 1.8%, adding to last week’s 3.4% slide. Together, the drop of almost 5% was the biggest two-week slump since a 7.5% tumble in mid-to-late September.
The Nasdaq Composite Index, which comprises marquee names in technology such as Amazon, Apple, Netflix and Google, closed the day down 105 points, or 1%, at 10,705. For the week, the Nasdaq fell 2.5%, extending last week’s 4% decline. Cumulatively, the drop of 6.5% represented the biggest two-week slump since a near 8% drop in mid-to-late September.
The slide in stocks came on the back of concerns about the global economy after the Federal Reserve, European Central Bank and the Bank of England ratcheted up talk of higher-for-longer interest rates.
The US central bank itself slowed rate hikes this week for the first time since 2022 began, imposing a 50-basis increase after four back-to-back hikes of 75 basis points between June and November. But Fed Chair Jerome Powell also indicated there will be rate hikes throughout 2023.
"US stocks are declining as investors can’t shake off all the hawkish rhetoric that came from central bankers this week and as the private sector clearly entered a strong downturn," Ed Moya, analyst at online trading platform OANDA, said. "Recession risks will only grow now that Powell has signaled that we should expect ‘ongoing increases’."
In its bid to control inflation, the Fed has added 375 basis points to interest rates since March via six rate hikes. Prior to that, interest rates were at a peak of 25 basis points as the US central bank cut rates to nearly zero after the global outbreak of the coronavirus pandemic in 2020.
Inflation, as measured by the US Consumer Price Index (CPI), expanded by 7.1% over the 12 months to November, versus a 7.7% in the year to October. Historical data showed it to be the lowest annual reading for inflation since December 2021. Even so, it was still three-and-a-half times higher than the Fed’s annual target of 2% per year.