The S&P 500 decreased 0.7% on Friday, as risk sentiment remained pressured by geopolitical uncertainty, disappointing growth-stock earnings reactions, and expectations for tighter monetary policy. The benchmark index was down as much as 1.2% intraday and up as much as 0.3%.
The Dow Jones Industrial Average also declined 0.7% while the Nasdaq Composite (-1.2%) and Russell 2000 (-0.9%) fared slightly worse.
Ten of the 11 S&P 500 sectors closed lower, with the heavily-weighted information technology sector (-1.1%) exerting influential weakness at the bottom of the standings. The consumer staples sector (+0.1%) was the only sector that closed higher, eking out a 0.1% gain.
Regarding Russia-Ukraine, the U.S. maintained that a Russian invasion was imminent, even as Russia’s foreign minister accepted an invitation to meet with Secretary of State Blinken next week. Mr. Blinken would travel to Europe for the meeting on the condition that there is no invasion of Ukraine.
With the market closed on Monday for Presidents’ Day, buyers preferred to wait and see for what transpires over the long weekend. There was a precautionary trade in the Treasury market, where the 10-yr yield declined four basis points to 1.93%. The U.S. Dollar Index rose 0.3% to 96.09. Oil prices settled lower ($91.21, -0.55, -0.6%).
The decline in long-term rates provided little relief for the growth stocks, as investors were dismayed to see another round of steep, earnings-driven declines in the space. Roku ( ROKU 112.46, -32.25, -22.3%), DraftKings ( DKNG 17.29, -4.77, -21.6%), and Redfin ( RDFN 22.86, -5.78, -20.2%) each plunged more than 20.0% following their reports.
The 2-yr yield, meanwhile, held steady at 1.47% as Fed officials continued to prepare the market for rate hikes.
Briefly, New York Fed President Williams (FOMC voter) said he supports steadily raising rates, starting in March. Cleveland Fed President Mester (FOMC voter) also advocated for a March rate hike, adding it would be appropriate to remove accommodation at a faster pace if inflation doesn’t moderate as expected.
Separately, DuPont ( DD 78.77, -0.96, -1.2%) agreed to sell the majority of its Mobility & Materials business to Celanese ( CE 144.25, -8.00, -5.3%) for $11 billion in cash.
Reviewing Friday’s economic data:
- Existing home sales increased 6.7% m/m in January to a seasonally adjusted annual rate of 6.50 million (Briefing.com consensus 6.08 million). Total sales in January were down 2.3% from a year ago.
- The key takeaway from the report is the push to buy existing homes in January as mortgage rates increased – and were expected to increase further. That left unsold inventory at a record low, which is going to keep price pressures elevated and prospective buyers, particularly first-time buyers, facing an affordability pinch in the face of such lean supply for lower-priced homes and higher mortgage rates.
- The Conference Board’s Leading Economic Index decreased 0.3% m/m in January (Briefing.com consensus +0.2%) following a revised 0.7% increase (from 0.8%) in December.
When the market reopens on Tuesday, investors will receive the Consumer Confidence Index for February, the FHFA Housing Price Index for December, the S&P Case-Shiller Home Price Index for December, and the preliminary IHS Markit Manufacturing/Services PMIs for February.
- Dow Jones Industrial Average -6.2% YTD
- S&P 500 -8.8% YTD
- Russell 2000 -10.5% YTD
- Nasdaq Composite -13.4% YTD
Overseas:
- Europe: DAX -1.5%, FTSE -0.3%, CAC -0.3%
- Asia: Nikkei -0.4%, Hang Seng -1.9%, Shanghai +0.7%
Commodities:
- Crude Oil -1.39 @ 90.05
- Nat Gas -0.06 @ 4.42
- Gold -0.90 @ 1899.00
- Silver +0.12 @ 23.94
- Copper +0.01 @ 4.53