Wall Street finished with a mixed performance on Friday, as ongoing uncertainty about the Federal Reserve led to another choppy session. The Dow ended the day higher, while the S&P 500 recorded its third lower finish in the past four sessions.
The Nasdaq Composite (COMP.IND) finished -0.6%, the S&P 500 (SP500) closed -0.3% and the Dow (DJI) ended +0.4%.
The Dow Jones rose 129.84 points to close at 33,826.69. The S&P 500 cut its earlier losses but still finished at 4,079.09, a decline of 11.32 points. The Nasdaq retreated 68.56 points to finish at 11,787.27.
With five of the 11 S&P sectors posting losses, Energy was the worst performer, falling by almost 3.7%. This came as oil prices dropped below $77 per barrel. Materials, Info Tech and Communication Services all finished lower, while Health Care, Utilities and Consumer Staples advanced.
Strength in healthcare helped buoy the Dow, which got a boost from UnitedHealth (UNH), Amgen (AMGN) and Johnson & Johnson (JNJ).
“With the Nasdaq up 13% year to date and 16% off the 2022 lows, growth is leading the way this year in a move causing ursine trauma of both the financial and psychological kind,” Alex King of Cestrian Capital Research told Seeking Alpha. “The second half of the week has been easier on the it’s-going-to-zero crowd as a modest selloff in the indices played out.”
King added: “In truth though, this appears to have been mainly options market driven, with put-heavy index options expiring today. Emotion aside, most all tech stocks have reported moribund calendar Q4 ’22 earnings but have been met with a sizeable stock price pop anyway. That in our view is further evidence of a bullish lean in the market.”
Following choppy trading earlier in the week, shares dropped on Thursday after another closely watched inflation gauge came in hotter than expected, raising concerns that Federal Reserve would need to extend its hawkish approach.
This downward bias carried over into Friday’s action, with stocks opening solidly in the red. A recovery in the afternoon allowed the Dow to push into positive territory, while cutting losses for the Nasdaq and S&P 500.
The broad consensus on Wall Street still calls for a 25-basis-point rate hike at the Fed’s March meeting. However, there has been a rising sense that an increase of 50 basis points could be possible.
The markets are currently pricing in an 18% chance of a 50-basis-point rise at the March meeting, with odds of approximately 82% that the increase will be 25 basis points. A week ago, the probability of a half-point increase sat at just 9% — meaning the perceived chance that the Fed will step up its rate hikes again has doubled over the course of a week.
Trading in the bond market was muted on Friday. The 10-year Treasury yield (US10Y) slipped 2 basis point to 3.82%, while the 2-year yield (US2Y) was basically flat at 4.62%.
Among active stocks, Deere (DE) surged 7% after reporting a better-than-expected quarterly earnings and providing a strong forecast.