Wall Street ends lower, sets off weekly winning streak on Fed concerns

  • Carmax surges after beating quarterly earnings
  • Starbucks workers on strike next week
  • Indices down: Dow 0.65%, S&P 0.77%, Nasdaq 1.01%

NEW YORK, June 23 (Reuters) – U.S. stocks closed lower on Friday, capping a week dominated by testimony from Federal Reserve Chairman Jerome Powell in which he signaled further interest rate hikes to come , but promised that the central bank would proceed with caution.

All three major U.S. stock indices lost ground in a broad selloff. Shares of interest-rate-sensitive megacaps weighed the heaviest on the tech-laden Nasdaq Composite Index (.IXIC), led by Microsoft Corp (MSFT.O), Tesla Inc (TSLA.O) and Nvidia Corp ( NVDA.O).

With few market catalysts this week outside of Powell’s congressional testimony, all three indices posted weekly losses, ending a week-long rally.

The Nasdaq ended its eight-week winning streak, its longest since March 2019, while the S&P 500 (.SPX) snapped its five-week rally, its longest since November 2021.

The S&P 500 and Nasdaq posted their biggest Friday-to-Friday percentage declines since early March, when the regional banking liquidity crisis hit.

“The market was overbought and gave a little back,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “(The rally) was driven by momentum, with fairly broad participation, and it’s no surprise that markets paused, and the pause was pretty orderly.”

Fed Bank of San Francisco President Mary Daly said in an interview with Reuters on Friday that two more rate hikes this year were a “very reasonable” projection, while echoing Powell’s call for more than caution in political decisions.

Atlanta Fed President Tom Barkin said late Thursday that he was not convinced inflation was on a steady path toward the 2% target, but added that he would not predict. the outcome of the central bank’s policy meeting in July.

Financial markets have priced in a 74.4% chance that the Fed will start raising the target federal funds rate another 25 basis points at the July meeting, according to CME’s FedWatch tool.

“You can probably count on a rate hike next month, but it’s this second hike that markets are skeptical about,” Mayfield added. “I would be surprised if the inflation data and other economic data merited this second hike by the time we get to the September (Fed) meeting.”

The Dow Jones Industrial Average (.DJI) fell 219.28 points, or 0.65%, to 33,727.43, the S&P 500 (.SPX) lost 33.56 points, or 0.77%, to 4,348.33 and the Nasdaq Composite (.IXIC) fell 138.09 points, or 1.01%, to 13,492.52.

All 11 major sectors of the S&P 500 lost ground, with utilities (.SPLRCU) suffering the highest percentage loss.

Chips weighed on tech stocks, with the Philadelphia SE Semiconductor Index (.SOX) slipping 1.8%.

Used-car market Carmax Inc (KMX.N) posted better-than-expected quarterly earnings, pushing its shares up 10.1%.

Starbucks Corp (SBUX.O) fell 2.5% after its unions said about 3,500 U.S. workers would strike next week to protest the chain’s ban on Pride Month decorations at its cafes.

The CBOE Market Volatility Index (.VIX), a gauge of investor anxiety, rose 0.53 points to 13.44, rebounding from a 3.5-year low.

Falling issues outnumbered advances on the NYSE by a ratio of 2.39 to 1; on the Nasdaq, a ratio of 2.03 to 1 favored the decliners.

The S&P 500 posted 18 new 52-week highs and four new lows; the Nasdaq Composite recorded 35 new highs and 138 new lows.

The Russell 2000 finalized the rebuilding of its stock constituents, fueling a surge in trading volume.

Volume on U.S. exchanges was 15.93 billion shares, compared to an average of 11.68 billion for the full session over the past 20 trading days.

Reporting by Stephen Culp; Additional reporting by Shubham Batra and Shristi Achar A in Bengaluru; Editing by Richard Chang

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