Spencer Platt
U.S. stocks on Friday were on track to end mixed, after swinging through yet another volatile trading session as investors remained concerned about the Federal Reserve's path on rate hikes going forward. A late session rally spurred by gains in defensive sectors helped Wall Street's major indices erase a chunk of their losses.
Into the final hour of trading, the tech-heavy Nasdaq Composite (COMP.IND) was down 0.74% to 11,767.65 points, having fallen as much as 1.54% earlier.
The benchmark S&P 500 (SP500) was lower by 0.38% to 4,074.93 points, having erased losses of as much as 1.04%. The Dow (DJI) was up 0.28% to 33,791.22 points, helped by its healthcare components Amgen (AMGN), Merck (MRK) and Johnson & Johnson (JNJ).
Of the 11 S&P sectors, six were trading in the red, with Energy falling more than 3%. Defensive sectors Utilities, Consumer Staples and Health Care topped the gainers.
For the week, the major averages are set to put in a mixed performance. The Nasdaq is on track to eke out slight gains of 0.42%, while the S&P and Dow are headed for marginal losses of 0.38% and 0.23%, respectively.
U.S. stocks have seen a lot of choppiness this week and have limped through volatile trading sessions, primarily triggered by hotter-than-expected inflation reports on both consumer and producer prices. Hawkish comments from Fed speakers on Thursday and today have also added to the gloomy atmosphere.
Cleveland Fed President Loretta Mester on Thursday said that she saw a "compelling case" for a 50 basis point rate hike at the central bank's monetary policy committee meeting earlier this month. Furthermore, St. Louis Fed President James Bullard on Thursday said that he couldn't rule out a 50 basis point rate hike at the Fed's March meeting.
Earlier today, Richmond Fed President Thomas Barkin at an event by CME Group said that he still wasn't "ready to declare victory on inflation," and that he favored 25 basis point hikes going forward as that allowed flexibility in responding to incoming economic data.
"Markets took a knock over the last 24 hours, with rates rising and equities selling off thanks to strong inflation data and hawkish central bank rhetoric, as some Fed officials even floated the prospect they might resume 50bp hikes ... we’ve seen a significant change in the market narrative since the jobs report, with much stronger-than-expected numbers on inflation and the economy raising the prospect that the Fed will keep hiking rates for some time yet," Deutsche Bank's Henry Allen said.
According to the CME FedWatch tool, markets are now pricing in a 81.9% probability of a 25 basis point hike at the Fed's March meeting, down from more than 90% earlier this week. Meanwhile, the probability of a 50 basis point hike has increased to 18.1%.
In another downbeat warning from a major name, Goldman Sachs now expects three more Fed rate hikes this year after the January producer price index came in stronger than anticipated.
The economic calendar was somewhat busy on Thursday. Data showed an unexpected rise in export prices in January, while import prices slid.
Additionally, U.S. retail e-commerce sales for the fourth quarter fell 0.1% Q/Q. Furthermore, January leading indicators fell as much as expected, while selected services revenue rose 1.6% in the fourth quarter.
Turning to the fixed income markets, yields were mixed. The 10-year Treasury yield (US10Y) was down 2 basis points to 3.82%, while the 2-year yield (US2Y) was flat at 4.62%.
Among active stocks, Albemarle (ALB) was the top percentage loser on the S&P 500 (SP500) after posting a significant gain in the previous session on its quarterly results. Conversely, farm equipment giant Deere (DE) was the top S&P percentage gainer after its earnings topped estimates.
DraftKings (DKNG) surged after its financial report.
Next week will see earnings from retail giants such as Walmart (WMT) and Home Depot (HD), which will give an idea of consumer spending in the all important holiday season fourth quarter. Chip giant NVIDIA (NVDA) is also on tap to report.
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