Sarah Travers
Wall Street experienced a moderate decline on Friday, with the S&P 500 and Nasdaq indexes taking a breather following consecutive sessions of record highs. Investors grappled with cautious projections from the Federal Reserve against the backdrop of a cooling economy.
- The S&P 500 and Nasdaq indexes paused after hitting record highs, while the Nasdaq was buoyed by Adobe’s 14.9% surge due to an upgraded revenue forecast.
- Market expectations pointed to a high probability of Fed rate cuts in September, contrasting with the Fed’s revised projection for fewer cuts this year.
- Despite megacap strength, concerns over economic recession risks persisted, influencing investor sentiment.
The Dow Jones Industrial Average declined by 298.48 points, or 0.77%, settling at 38,348.62 by mid-morning. The broader S&P 500 was down 22.72 points, or 0.42%, at 5,411.02, while the Nasdaq Composite slipped 17.10 points, or 0.10%, to 17,650.46.
Sectoral declines were led by industrials, which saw a notable slide of 1.8%, and the economically sensitive small-cap Russell 2000 index lost 1.6%. On the other hand, Broadcom extended gains with a 2.2% rise following a positive forecast and a stock split announcement.
Adding to market unease, the University of Michigan’s preliminary survey showed a Consumer Sentiment Index drop to 65.6 in June, sharply lower than the anticipated 72. This underscored concerns about consumer outlook amidst broader economic uncertainties.
Market breadth remained negative, with declining issues outnumbering advancers by a ratio of 3.49-to-1 on the NYSE and 2.81-to-1 on the Nasdaq. The S&P index recorded four new 52-week highs and 14 new lows, while the Nasdaq noted 14 new highs against 110 new lows.
Investor sentiment continued to pivot around Federal Reserve signals. The Fed’s stance, marked by a dialing back of earlier rate cut projections, contrasted sharply with market expectations, which were underpinned by a perceived 70% likelihood of a September rate cut according to CME’s FedWatch tool. This discrepancy underscored ongoing uncertainty about the path of monetary policy in response to evolving economic data.
The market’s resilience in recent weeks has been partly fueled by hopes of imminent Fed policy easing and the strength of megacap stocks. The S&P 500 and Nasdaq were both on track for their seventh week of gains out of the last eight, though concerns lingered about the sustainability of these gains in the face of economic headwinds.
According to BofA Global Research, U.S. value stock funds saw significant outflows totaling $2.6 billion, while growth stock funds attracted $1.8 billion in inflows during the week preceding Wednesday. This divergence highlighted investor preference for growth-oriented assets amid uncertain economic conditions.
Looking ahead, market participants awaited further comments from Federal Reserve officials, including statements from Chicago Fed President Austan Goolsbee and Fed Governor Lisa Cook. Their remarks were anticipated to provide additional insights into the central bank’s current stance and its considerations moving forward.
Overall, while Wall Street’s recent rally has been impressive, the current environment reflects a delicate balancing act for investors navigating between upbeat market sentiment and cautious economic signals. The evolving narrative around Fed policy and economic indicators will likely continue to shape market dynamics in the coming weeks.
