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Dow, S&P post worst week in months after hawkish Fed spooks investors

Published 06/18/2021, 07:08 AM
Updated 06/18/2021, 07:01 PM
© Reuters. FILE PHOTO: A street sign is seen in front of the New York Stock Exchange on Wall Street in New York, February 10, 2009. REUTERS/Eric Thayer/File Photo

© Reuters. FILE PHOTO: A street sign is seen in front of the New York Stock Exchange on Wall Street in New York, February 10, 2009. REUTERS/Eric Thayer/File Photo

By David French

(Reuters) - U.S. stocks ended sharply lower on Friday, with the Dow and S&P 500 posting their worst weekly performances in months, after comments from Federal Reserve official James Bullard that the U.S. central bank might raise interest rates sooner than previously expected spooked investors.

The blue-chip Dow and the benchmark S&P 500 started the week at record closing levels, but ultimately fell by their most in any week since late October and late February, respectively.

The tech-heavy Nasdaq index also closed lower despite posting its two highest ever finishes in the last five days.

Investor confidence in their existing positions was initially dinged by the Fed's policy meeting, where it projected interest rate hikes would happen sooner than anticipated, and signaled it was reaching the point where it could begin talking about tapering its massive stimulus - as opposed to just thinking about it.

This was compounded by Bullard, president of the St. Louis Federal Reserve, saying Friday he was among the seven officials who saw rate increases beginning next year to contain inflation.

Inflation, and how the U.S. central bank will tackle it as the country comes out of the pandemic, had been front-and-center of investors' minds in the run-up to the policy meeting, which ended on Wednesday.

"I'm not surprised to see the market sell off a little bit. I'm never surprised, given the strong run we've had for such a long period of time, when you see some periods of profit-taking," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

The CBOE volatility index, Wall Street's fear gauge, closed Friday at a four-week high.

"Next week, you will have various Fed governors give speeches, and we'll have the same thing: some governors will be more hawkish, and some will be more dovish, so you'll see some back-and-forth," Ghriskey added.

On Friday, the Dow Jones Industrial Average fell 533.37 points, or 1.58%, to 33,290.08, the S&P 500 lost 55.41 points, or 1.31%, to 4,166.45 and the Nasdaq Composite dropped 130.97 points, or 0.92%, to 14,030.38.

The U.S. dollar strengthened after Bullard's comments, pushing the index which tracks the greenback against six major currencies to its highest level since mid-April.

While U.S. crude prices - which traditionally suffer from a strong dollar - initially fell on Friday, they rebounded after OPEC sources said the producer group expected limited U.S. oil output growth this year. [O/R]

The upward commodity move didn't translate into positive sentiment for U.S. energy stocks, with the sector's index the worst performer on the day. The utilities and financials indexes also fell by more than 2%.

© Reuters. FILE PHOTO: A street sign is seen in front of the New York Stock Exchange on Wall Street in New York, February 10, 2009. REUTERS/Eric Thayer/File Photo

Friday was also "quadruple witching day," the quarterly simultaneous expiration of U.S. options and futures contracts. It was the largest options expiration in history, noted Randy Frederick, vice president of trading and derivatives for Charles Schwab (NYSE:SCHW).

Volume on U.S. exchanges was 14.97 billion shares, compared with the 10.96 billion average over the last 20 trading days.

Latest comments

like always, everybody forgets reality. the markets today are "absurdly" overvalued. and, they were ridiculously overvalued right before covid-19 hit. but, oh no! that's not the way it really is. its gonna keep going up for ever. pull your head out from between your buttocks.
End of 2022 is a very very long time in today’s volatile and instantly reactive market. No need to get panicky. That’s 18 long long months to go !!! 🤣
the markets were ridiculously overpriced pre-covid. they are absurdly overpriced today. and, there's no reason to think the fed won't move up the timeline - again. it always happens this way. they keep pumping it up even after the decline begins, and then call the date of the crash months after in actually began, just to save face. when you've lived long enough, you know how it works.
Total spooky fed.. Boo.. Then.. Boo a few times... Lol
thanks alot hawkish fed
How is it possible that a man as experienced as Bullard does not know what his words will lead to? They must check whether his friends or family made any money shorting the market.
Or he was asked a question and he gave an honest opinion.
bullard is not even a voting member.
Bullard should be sacked and then sued.
Why? Contrary to what Trump believed, it's not the Fed's job to keep the stock market going up at all costs. As long as Bullard was just being honest, you can't fault him for his comments.
The Fed has been consistent for decades...always late to the game..we always pay for incompetence.
Just another Bear trying to put his opiniated negative Short remarks on the market . Thats just his opininion yhat im sure hes shoritng the market
And let me guess, you are long on the stock market correct? Why does your personal bias not disqualify your opinion, just as you say the shorts are biased?
The entire bull market we're in is a result of money printing on an unprecedented scale and it was going to come to an end eventually.  If you think these businesses are actually doing well and that a significant portion of the economy isnt dominated by zombie companies you're blissfully clueless about how bad things really are.
the US as a nation and an economy should look to create value (like corporations) instead of figuring a way to stop inflation. Creating value is really the only way to stop unwanted inflation, since inflation is kind of the only way to create value in a stagnant economy. So the US should really look to the European model and create a conglomerate union, i.e. merge it's economy with Canada or Mexico. This will positively change the economic landscap and create opportunity. And for the most part put the US economy on a more even playing field with China and the EU in terms of labor force and demographics.
you guys should be institutionalized. If you think America should be like Europe, you haven't been paying attention for the last 250 years. Either that, or you two are not Americans and are still ignorant of history and economics
totally agree, people are so darn ignorant these days, they shouldn't be allowed opinions about a country they despise and complain constantly about, they can go get force vaccinated 100 times in Europe and see how long they live.
even three year olds are allowed to have opinions, but it doesn't make them wise
Without Fed support there is no “recovery”. That is the phony nature of this whole thing. Fed cant take away support unless they are willing to ***this bubble. Buy your gold and silver before its too late!
Well obvioulsly we will have Fed support and Fed government Infastruture deal . Get i to growth stocks . Gold is done and over hyped
I really can't understand what the people of USA think. Interest rate will increase after a minimum of 18 months and people start panic selling from today.Horrible mindset.
interest rate is just an excuse. if you haven't figured out yet.
This isn't panic selling, they're pricing it in because its going to happen.  You know, like how people price in a post-COVID economy where everything is peachy based on nothing or price in 20 years of growth and technological advances for growth stocks?  It's a 1% drop lmao
The US economy is strong, and containing inflation is a good thing. Do the people who are dumping their stocks get mad at their spouse when they streer the car away from danger? Only crazy people do that. And only crazy people get mad when the Fed takes action to keep the economy out of danger. And if you didn't see this coming, you need to stop listening to liberal news outlets.
So creating inflation then containing it. Because too little is bad and too much is bad, we need it just right and the Fed knows best lol
If the US economy was strong the fed wouldn't have had to consistently increase QE since 2008 to keep zombie companies alive.  It's entirely built on a house of cards.
Maybe he open short position before speak.
Maybe he open short position before speak.
why the ******do they come and speak irresponsibly!
why the ******do they come and speak irresponsibly!
Why do people post crass omments !!
Remarkable how simple words from the FED that they may or may not let go a silent *****in 2 years tumbles the markets. How can anyone with at least one working braincell say that this is not a central planned economy?
By moving one:s lips and tongue ??
 Haha :). Yes, such statement could be a result of mere muscle contractions rather than have its source in a reasonable thought process in the brain.
500 pts down. Keep it low... yahoo!
Extremely strange of senior Federal Reserve official to make such an irresponsible statement.
Maybe it's a very convenient time for them to make such a statement 🧐
The us stock party is over nowww
He was among the seven from March meeting, so what's new?
nothing lol
it's all fake manipulation to keep the minions the minions and them in control. Funny how it got 10x worse starting Jan 20th
"with most of the data showing gains in excess of 3% towards the end of this year" more like 13% is the true figure...this is going to get ugly!. No sign of tapering either..not sure the FED can!
The Fed cannot raise the rates or slow the money printing because everything woud collapse. They just desperately trying to explain why they never hike the rates while they really should and try to postpone the inevitable collapse.
Fed is also bound to feed economy so nothing much to concern
Fed is also bound to feed economy so nothing much to concern
They're trying to have their cake and eat it too
I wonder how much longer will the fastly diminishing ‘bulls’ be able to keep on ‘pushing’ the s+p 500 to peak levels???? When the real force of the selling wave comes in action, there will be serious losses incurred by all those who ‘are expessing fragile smiles’…. I have the feeling we will not be waiting for long.
Well said 👍
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