Stocks ended a volatile session essentially flat Friday, with the Dow Jones Industrial Average squeaking into positive territory and the S&P 500 sliding into bear market territory.
The Dow, which was down more than 600 points at one point, finished up 8 points, or 0.03%, to 31,261, while the S&P 500, which is down 19.8% for the year, gained 0.01%. The tech-focused Nasdaq lost 0.30%.
The markets remained focused on many fears including the effect of more rate hikes from the Fed, a global economy hit hard by supply chain bottlenecks, Covid lockdowns in China, as well as food and energy shortages caused by Russia's invasion of Ukraine.
Kansas City Fed president Esther George said Thursday that central banks may not be gunning for stock markets, but they aren't going to be deterred by their recent slump in pushing rate hikes to fight the fastest inflation in four decades.
"What we are looking for is the transmission of our policy through markets understanding that tightening should be expected," George told CNBC. "It is not aimed at the equity markets in particular but it is one of the avenues through which tighter financial conditions would emerge."
Even still, rate traders are pricing in a 91.1% chance of a 50 basis point hike next month, according to the CME Group's FedWatch tool, as well as an 13% chance of a 75 basis point move in July, despite Jerome Powell's assertion that a rate hike of that magnitude isn't being "actively considered."
"At the beginning of the year, no one thought that the S&P 500 was headed to bear market territory, but persistent inflation, another Fed policy mistake, and recession fears have unnerved investors," said Edward Moya, senior market analyst for the Americas with Oanda. "The S&P 500 has lost over 20% of its value from the January high and it seems that that technical selling will only accelerate."
The way macro backdrop is unfolding, Moya said, "it seems traders will continue to fade any rallies that emerge until the Fed starts to show signs that they are worried about financial conditions and that they may stop tightening so aggressively."
Curiously, global stocks got an overnight boost from the opposite tack -- a rate cut from China's central bank aimed at easing borrowing costs in the housing market. The world's second largest economy appears at risk of recession as a result of its Covid resurgence and draconian lockdown orders.
The region-wide MSCI ex-Japan index was marked 2.2% higher heading into the close of trading, while Europe's Stoxx 600 rose 1.1% for its first gain in three days in Frankfurt.
Benchmark 10-year Treasury bond yields fell to 2.783% while and the dollar index rose 0.45% against a basket of six global currencies to 103.06.
Retail
Ross Stores (ROST) shares tumble 22.3% as the budget retailer became the last victim of sector sentiment after a weaker-than-expected April quarter.
Ross Stores, which operates the 'Dress for Less' and "dd's Discounts' brands, posted first quarter sales of $4.3 billion, missing Street forecasts, and cautioned that same-store sales for the three months ending in July would likely decline by as much as 6% when compared to last year's tally, which was supported by post-pandemic stimulus.
Full-year sales are also likely to decline, the company said, and rising input costs will likely add to the margin pressures retailers around the country are facing, clipping fiscal 2023 profits.
Palo Alto Networks (PANW) shares, meanwhile, surged 9.7% following a better-than-expected third quarter earnings report and another solid near-term outlook for its cybersecurity products.
Deere & Co. (DE) fell 14.1% despite posting better-than-expected second quarter earnings and boosting its full-year profit forecast as farm equipment demand looks set to outpace inflation and supply-chain pressures that are disrupting delivery schedules.
Applied Materials (AMAT) fell, after the semiconductor equipment maker posted softer-than-expected second quarter earnings a muted near-term outlook.
