The broader S&P 500 index slid about 1.1 percent, adding to the 3.6 percent it gave up the day before. The Nasdaq — which has been heavily battered as investors dump highflying tech companies — was trading down 1.9 percent after Thursday’s 5 percent dive.
Dow plunges more than 1,000 points as fears about economy intensify
The trends held despite a better-than-expected jobs report, which showed the United States added 428,000 positions in April amid a number of forces threatening economic growth. Relief about the strength of the labor market — with unemployment steady at a pandemic-low of 3.6 percent — was quickly eclipsed by concerns about rising interest rates.
“Friday’s strong jobs number and elevated wage growth confirms the Federal Reserve’s plans to raise interest rates to cool rising inflation, which is being driven in part by the tight labor market and rising wages,” said Robert Schein, chief investment officer of Blanke Schein Wealth Management, in comments emailed Friday to The Post.
“The stock market isn’t thinking about how the economy has performed in recent months, but instead what the economy will look like over the next 6-12 months,” Schein noted, with investors lasered in on the possibility that an aggressive rise in rates could trigger a recession.
U.S. unemployment rate remains 3.6 percent, near 50-year lows
Stocks oscillated wildly this week — soaring one day and careening the next — as investors tried to wrap their heads around the Fed’s approach to reining in the rampant inflation that is seeping into every aspect of American life. Mortgage rates are now at their highest level since 2009, according to data out Thursday from Freddie Mac, with the 30-year fixed average climbing to 5.27 percent. It was 5.1 percent a week ago and 2.96 percent this time last year.
The S&P 500 has dropped 14 percent year-to-date, and the Dow, 10.5 percent, according to MarketWatch, while the Nasdaq has tanked 23 percent.
Though the market’s fluctuations appear dizzying, the reality is that the reset is in line with historical precedent: In the past 70 years, the S&P 500 has averaged a maximum drawdown of 14 percent annually.
Still, history has also shown that “most Fed tightening cycles have led to recession,” David Donabedian, chief investment officer of CIBC Private Wealth US, said Friday in comments emailed to The Post.
“Current market sentiment does not place a lot of confidence in the Fed getting inflation under control without a recession,” Donabedian said, noting that skepticism will likely persist “until there is clearer evidence inflation has crested and has begun to fall.”
Unease is reflected in readings from “Wall Street’s fear gauge”, or Cboe’x volatility index, which is up 90 percent for the year, according to MarketWatch.
Moods were similarly sour overseas as investors reckoned with ongoing economic fallout from the war in Ukraine and the pandemic.
Mortgage rates spike to their highest level in nearly 13 years
Asian markets declined broadly as China’s tough pandemic restrictions continued to weigh on business activity; widespread coronavirus outbreaks have bought entire cities to a standstill and hobbled manufacturing and shipping hubs across the country. With the exception of Japan’s Nikkei 225, which closed nearly 0.7 percent higher, all major indexes registered losses. Hong Kong’s Hang Seng Index tumbled 3.8 percent, while the Shanghai Composite index gave up more than 2 percent.
“There will be more than a few investors rather glad that today’s Friday,” Danni Hewson, a financial analyst with AJ Bell, said Friday in comments emailed to The Post. “Fragile is a word that’s been used quite a bit to describe sentiment following a slew of central bank rate rises and disappointing outlooks.”
Earnings season has provided little relief for investors as the tangle of unpredictable economic and geopolitical tensions eats into companies’ bottom lines.
“Pretty much across the board, consumer-facing stocks are under pressure from the cost-of-living crisis and their own budgeting issues,” Hewson said, pointing to Under Armour, whose stock tumbled more than 23 percent Friday after the sports apparel maker recorded a nearly $60 million net loss in the first quarter. By comparison, it posted a more than $77 million profit the same period last year.
“We are continuing to serve the needs of athletes amid an increasingly more uncertain marketplace,” Patrik Frisk, Under Armour’s chief executive, said Friday in the company’s earnings report, citing supply chain challenges and “emergent covid 19 impacts in China.”
Adidas shares also sank 5 percent after the company lowered its 2022 sales forecast, citing the Chinese lockdowns and supply chain disruptions. The German sportswear company reported net profits of $327 million in the first quarter, down 38 percent from 2021.
In Europe, markets closed in the red across the board, with the broader Stoxx 600 index shedding 1.9 percent as the region prepared to enact sanctions targeting Russian oil, including a ban on petroleum imports.
Oil prices climbed higher in response, with Brent crude, the international oil benchmark, gaining 1.8 percent to trade near $113 per barrel. West Texas Intermediate crude, the U.S. oil benchmark, gained 2 percent to trade around $110 per barrel.
Gold, an investor safe haven in times of turbulence, climbed 0.7 percent to trade at around $1,888.70 per troy ounce.
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