All three major US stock indexes slid to levels not touched since mid-July, with the S&P 500 closing below 3,900, a closely watched support level.
The Dow Jones Industrial Average fell 139.4 points, or 0.5%, to 30,822.42, the S&P 500 lost 28.02 points, or 0.7%, to 3,873.33 and the Nasdaq Composite dropped 103.95 points, or 0.9%, to 11,448.40.
Staggering past the finish line of a week rattled by inflation concerns, looming interest rate hikes and ominous economic warning signs, the S&P 500 and the Nasdaq suffered their worst weekly percentage plunges since June.
“It’s been a tough week. It feels like Halloween came early,” said David Carter, managing director at JPMorgan in New York. “We are facing in this toxic brew of high inflation, high interest rates and low growth, which isn’t good for stock or bond markets.”
Risk-off sentiment went from simmer to boil in the wake of FedEx’s withdrawal of its earnings forecast late Thursday, citing signs of dampening global demand.
FedEx’s move followed remarks from the World Bank and the IMF, both of which warned of an impending worldwide economic slowdown.
A deluge of mixed economic data, dominated by a hotter-than-expected inflation report (CPI), cemented an interest rate hike of at least 75 basis points at the conclusion of the Fed’s monetary policy meeting next week.
“While the market is expecting a big bump in the Fed’s rates next week, there is tremendous uncertainty and concern about future rate increases,” Carter added. “The Fed is doing what it needs to do. And after some pain, markets and the economy will heal themselves.”
Financial markets have priced in a 18% likelihood of a super-sized, 100 basis point increase to the Fed funds target rate on Wednesday, according to CME’s FedWatch tool.
FedEx shares tanked by 21%, the biggest drop in the S&P 500.
Peers United Parcel Service and XPO Logistics slid 4.5% and 4.7%, respectively, while Amazon slipped 2.1%.
The session also marked the monthly options expiry, which occurs on the third Friday of every month. Options-hedging activity has amplified market moves this year, contributing to heightened volatility.
The CBOE Market Volatility index, often called “the fear index,” touched a two-month high, breezing past a level associated with heightened investor anxiety.