Rate fears send Dow lower by almost 1,000 points; S&P 500, Nasdaq hit one-month lows

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Wall Street succumbed to another bout of selling pressure on Friday, adding to a retreat that took place during the previous session. With the decline, the major averages all reached their lowest levels since mid-March.

Concentrating on macro concerns rather than the ongoing earnings season, investors cut their positions in equities. The selling came in the face of renewed concerns that the Federal Reserve will dramatically accelerate its rate-hike schedule, with many experts arguing that 75-basis-point increases are now on the table for upcoming central bank meetings.

At the close, the Dow (DJI) finished -2.8%, logging a decline of nearly 1,000 points. The S&P (SP500) ended -2.8% and Nasdaq (COMP.IND) closed -2.6%.

Looking at the day’s closing numbers, the Dow dropped 981.36 points to close at 33,811.40. The S&P dropped below the 4,300 level, sliding 121.88 points to end at 4,271.78. The Nasdaq concluded trading at 12,839.29, a decline of 335.36 points on the session.

All 11 S&P sectors are lower, the second day in a row with a complete wash of red among the major market segments. Health Care and Materials were the worst performers, each falling more than 3%.

Looking to the bond market, yields generally held steady after a rise the previous day. The 10-year Treasury yield slipped 2 basis points to 2.90% and the 2-year was basically unchanged at 2.69%. The 2-10 spread has gone quickly from 40 basis points to around 20, continuing its volatile moves since it inverted.

Fed chief Jay Powell essentially confirmed a 50-basis-point rate hike in May yesterday and the market quickly priced in 75-basis-point hikes soon after.

Fed swaps are now pricing in four 50-basis point hikes through to September. Nomura came out today saying it expects 75-bps hikes in June and July.

“We recognize Fedspeak has not outright endorsed a 75 basis point hike yet, but in this high inflation regime we believe the nature of Fed forward guidance has changed – it has become more data dependent and nimble,” Nomura’s Rob Subbaraman said.

Among the most active stocks, HCA was the biggest S&P decliner. Kimberly Clark was among the best S&P performers following strong earnings and guidance.