U.S. stocks spiraled on Friday as fears of aggressive Federal Reserve policy had equity markets pace towards a big weekly loss and Treasury yields continue a perilous climb to fresh highs.
The benchmark S&P 500 plunged 2.1%, testing its June 16 low. The Dow Jones Industrial Average shed 600 points, or 2%, briefly falling into bear market territory, and the technology-heavy Nasdaq Composite was off by 2.1%. The CBOE Volatility Index (^VIX) — Wall Street’s “fear gauge” — rose above 30.
Meanwhile, the 2-year U.S. Treasury note spiked above a 15-year high of 4.2% and the 10-year U.S. Treasury held near 3.7%, hitting the highest level since 2010. In commodity markets, crude oil fell sharply, with West Texas Intermediate (WTI) futures plummeting roughly 6% to $78.66 per barrel and Brent crude oil down nearly 5% at $85.97 per barrel.
The moves come after Federal Reserve officials raised interest rates by 75 basis points for a third straight time earlier this week and Chair Jerome Powell implied in hawkish remarks that policymakers were prepared to accept economic pain in exchange for restoring price stability. Central banks around the world have followed suit in recent days.
Goldman Sachs has slashed its year-end 2022 target for the S&P 500 index by about 16% to 3,600 from 4,300.
“The expected path of interest rates is now higher than we previously assumed, which tilts the distribution of equity market outcomes below our prior forecast,” Goldman’s David Kostin said in a note.
“Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude and duration of a potential recession and investment strategies for that outlook,” he wrote.
In corporate news, Costco (COST) was among Friday movers after the bulk retailer reported fiscal fourth-quarter earnings and revenue that beat Wall Street estimates but said inflationary pressures were weighing on profit margins as consumer habits shift. Shares were down 3% on Friday.
Shares of FedEx (FDX) dropped…