Stock futures were lower on Friday to close out a losing week as investors fear the Federal Reserve’s aggressive hiking campaign to fight inflation will lead to an economic downturn.
Dow Jones Industrial Average futures fell by 235 points, or 0.8%. S&P 500 futures lost 0.9%. Nasdaq 100 futures shed 1%.
Friday is set to be the fourth negative session in a row for the major averages. The Fed on Wednesday enacted another super-sized rate hike of three-quarters a point and indicated it would do another at its November meeting.
Bond yields have soared this week on the Fed’s actions with the 2-year and 10-year Treasury notes hitting highs not seen in more than a decade. Stocks that would suffer the most in a recession have led the losses this week with the Consumer Discretionary Select Sector SPDR Fund off by more than 5%. The Real Estate Select Sectors SPDR Fund is off by 6%.
“You’ve just got this volatility that nobody seems to be able to get their head around,” said Tim Lesko, a senior wealth advisor at Mariner Wealth Advisors.
Lesko said more investors are starting to accept that a recession may be on the horizon after the Fed’s decision this week to hike rates by 75 basis points and FedEx CEO Raj Subramaniam saying on CNBC last week that he believed one was imminent. Once that happens, Lesko said investors will react differently.
“At some point, they’ll figure out that recession doesn’t mean the end of the world, and they’ll start getting constructive on stocks again,” he said. “But right now, we’re acting as if the sky’s falling.”
Major averages are on pace for their fifth negative decline in the last six. The Dow has given up about 2.4% this week and is nearing its 2022 closing low set in June. Both the S&P and Nasdaq saw slightly sharper declines, falling 3% and 3.3%, respectively, week to date.
Costco stock was down about 3% in premarket trading. Although the retailer posted fiscal fourth-quarter revenue and earnings that topped analysts’ expectations, it is seeing higher freight and labor costs.