Stocks faced a substantial downturn on Friday, continuing the negative trend observed in the previous session, with all major indices experiencing notable declines. The tech-heavy Nasdaq bore the brunt of the sell-off.
Towards the end of trading, the indices hovered slightly above their session lows. The Nasdaq dropped by 370.30 points, or 1.9%, to 18,737.35; the S&P 500 fell by 66.47 points, or 1.1%, to 5,882.70; and the Dow Jones Industrial Average decreased by 232.27 points, or 0.5%, to 43,518.59.
The downturn was largely driven by apprehensions about future interest rate policies triggered by Federal Reserve Chair Powell's comments. On Thursday, Powell indicated that the central bank is not in a rush to cut rates, citing the robust state of the U.S. economy. He suggested that the Fed can afford a deliberate approach to monetary decisions.
While a rate cut is still anticipated next month, the CME Group's FedWatch Tool shows the probability of a quarter-point reduction has dropped to 62.1% from 72.2% the previous day. This outlook was influenced by a report from the Commerce Department, which revealed retail sales in October increased slightly more than expected.
Specifically, retail sales rose by 0.4% in October, following a 0.8% increase in September. Economists had estimated a 0.3% rise, compared to the initial report of a 0.4% gain the prior month. Additionally, the Labor Department’s report highlighted an unforeseen rise in import prices in October, exacerbating inflation concerns.
In contrast, the Fed reported a decline in industrial production for October, which was influenced by the aftermath of recent hurricanes and the now-resolved Boeing strike.
**Sector Highlights**
Biotechnology stocks dipped sharply following the announcement of President-elect Donald Trump's selection of vaccine skeptic Robert F. Kennedy Jr. as the Secretary of Health and Human Services. This decision led the NYSE Arca Biotechnology Index to drop by 4.2%, reaching a three-month low.
Semiconductor stocks also exhibited significant weakness, reflected in the Philadelphia Semiconductor Index's 2.7% decline, marking its lowest point in nearly two months. Applied Materials (AMAT), a semiconductor equipment manufacturer, led this downturn despite posting better-than-expected fourth-quarter results, as they issued disappointing revenue guidance for the current quarter.
Pharmaceutical, software, and retail stocks also faced significant declines, whereas utility stocks resisted the overall downward trend.
**Global Markets**
In international markets, the Asia-Pacific region showed mixed outcomes on Friday. Japan's Nikkei 225 Index increased by 0.3%, whereas China's Shanghai Composite Index fell by 1.5%. In Europe, all major markets recorded declines. The French CAC 40 Index decreased by 0.5%, the German DAX Index fell by 0.3%, and the U.K.'s FTSE 100 Index edged down by 0.1%.
In the bond market, treasuries recovered somewhat from their earlier lows but continued to exhibit losses. Consequently, the yield on the benchmark ten-year note rose by 2.7 basis points, settling at 4.447%.
