Stocks extend losses as investors weigh hawkish Powell remarks, more corporate earnings

U.S. stocks were mostly lower Friday as investors assessed more corporate earnings and hawkish comments from Federal Reserve Chair Jerome Powell that hinted a half-point rate hike was likely next month.

The S&P 500 dipped 0.3%, on pace to round out a third straight week of losses, while the Dow Jones Industrial Average fell 170 points. The tech-heavy Nasdaq Composite climbed slightly, up 0.2%. Meanwhile, Treasury yields continued their march forward, with the 10-year U.S. benchmark yielding 2.9%, the highest level since December 2018.

Speaking at a panel hosted by the International Monetary Fund Thursday, Powell said a 50-basis point rate increase was “on the table” for May when the U.S. central bank holds its next policy-setting meeting. The Fed chair also reiterated that policymakers were committed to “front-end loading” inflation-fighting efforts.

“We really are committed to using our tools to get 2% inflation back,” Powell said in remarks before European Central Bank President Christine Lagarde and other officials, referring to the Fed’s target for annual price increases.

“We’re definitely in the cards for a 50 basis point rate hike in the May meeting,” Capital2Market President Keith Bliss said on Yahoo Finance Live on Thursday (video above). “The market is pretty good at dictating, if not indicating, where this is going to go.”

With the headline Consumer Price Index at its highest level in four decades, the U.S. Federal Reserve has recently signaled aggressive monetary tightening is underway to rein in rising price levels despite warnings from experts that moving too quickly could result in an economic contraction.

“The big question is whether the earnings can really sustain this kind of a macro backdrop of slower growth and Fed policy,” Deutsche Bank Wealth Management Chief Investment Officer Deepak Puri said on Yahoo Finance Live earlier this week. “It seems certain companies can — historically that’s been the case. What’s different this time is really the trifecta, which is higher costs of capital, quantitative tightening, plus a lack of … a big fiscal stimulus.”

Despite worries from Wall Street over the next policy moves and the risks posed to traders, a readout of the Federal Reserve’s recently published Beige Book suggests Main Street sentiment remains positive overall.

Strategists at LPL Research said the Beige Book Barometer may provide a more accurate picture of the economic outlook than current consumer sentiment, which has been weak in the face of soaring inflation. Despite an economic slowdown in the first quarter, data out of Washington has come in better than consensus expectations in recent weeks.

“Looking at the Fed’s most recent Beige Book, local U.S. businesses remain resilient despite elevated uncertainty,” LPL Financial Asset Allocation Strategist Barry Gilbert said. “Inflation, COVID, and the conflict in Ukraine will keep uncertainty elevated in the near term, but if we can navigate these challenges we believe there are solid prospects of a pick-up in growth in the second half of the year.”

Elsewhere in markets, shares of American Express (AXP) fell 1.5% despite a beat on its quarterly earnings in results out Friday morning. Shares of Verizon (VZ), which also reported before the opening bell, tumbled 6% after the telecommunications giant said it lost 36,000 monthly phone subscribers during the first quarter.

Investors continued to watch Snap Inc. (SNAP) after the company projected a strong outlook for user growth on Thursday despite warning supply-chain disruptions and inflation could continue to hurt advertising demand. Shares of Snap were up about 0.3% in early trading.

10:03 a.m. ET: U.S. business activity decelerates in April

Business activity across the U.S. eased in April, with inflationary pressures putting a dent in service sector output as rising prices weighed on spending.

S&P Global’s Flash Composite Purchasing Managers’ Index, which serves as a measure of overall economic health, fell to a reading of 55.1 this month from 57.7 in March. Economists surveyed by Bloomberg expected a reading of 57.9. Any reading above 50 indicates growth in the private sector.

“Many businesses continue to report a tailwind of pent up demand from the pandemic, but companies are also facing mounting challenges from rising inflation and the cost of living squeeze, as well as persistent supply chain delays and labor constraints,” S&P Global chief business economist Chris Williamson said in a statement.

“These headwinds, plus increased concerns over the economic outlook and tightening monetary policy, meant business confidence about the outlook slipped sharply lower in April. However, with the overall pace of economic growth and hiring remaining relatively solid, for now the focus from a policy perspective is likely to remain firmly on the need to rein in the record high inflationary pressures signaled by the survey.”

9:30 a.m. ET: Stocks extend losses after Powell rate comments spook investors

Here’s where the main benchmarks opened at the start of Friday’s trading session:

  • S&P 500 (^GSPC): -15.81 (-0.36%) to 4,377.85

  • Dow (^DJI): -229.65 (-0.66%) to 34,563.11

  • Nasdaq (^IXIC): +0.85 (+0.01%) to 13,175.50

  • Crude (CL=F): -$2.01 (-1.94%) to $101.78 a barrel

  • Gold (GC=F): -$13.10 (-0.67%) to $1,935.10 per ounce

  • 10-year Treasury (^TNX): +1.1 bps to yield 2.9280%

7:00 a.m. ET: Futures edge lower as S&P 500 sets out for another losing week

Here were the main moves in futures trading ahead of the opening bell Friday:

  • S&P 500 futures (ES=F): -12.75 (-0.29%) to 4,377.75

  • Dow futures (YM=F): -95.00 (-0.27%) to 34,614.00

  • Nasdaq futures (NQ=F): -39.75 (-0.29%) to 13,688.50

  • Crude (CL=F): -$1.48 (-1.43%) to $102.31 a barrel

  • Gold (GC=F): -$12.10 (-0.62%) to $1,936.10 per ounce

  • 10-year Treasury (^TNX): 0.00 bps (0.00%) to yield 2.9170%

6:53 p.m. ET Thursday: Stock futures muted after hawkish Powell remarks sent indexes tumbling

Here’s where stocks were trading ahead of the overnight session on Thursday:

  • S&P 500 futures (ES=F): -1.50 (-0.03%) to 4,389

  • Dow futures (YM=F): -3.00 (-0.01%) to 34,706

  • Nasdaq futures (NQ=F): -4.75 (-0.03%) to 13,723.50

  • Crude (CL=F): -$0.03 (-0.3%) to $103.76 a barrel

  • Gold (GC=F): +$4.60 (+0.24%) to $1,952.80 per ounce

  • 10-year Treasury (^TNX): +0.077 bps (+2.71%) to yield 2.9170%

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., April 14, 2022. REUTERS/Brendan McDermid

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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