Wall St fights for footing after steep selloff on recession worries

NEW YORK: Wall Street’s main indexes struggled to find momentum on Friday following a brutal selloff this week due to recession fears triggered by a series of interest rate hikes by the Federal Reserve and other major central banks.

Stubbornly high inflation has spooked investors this year as they adapt to the end of the era of cheap money, bringing on worries about price pressures hurting corporate profits and economic growth.

All the three major indexes were on track for their third straight weekly losses, with the benchmark S&P 500 index on pace for its worst showing since October 2020.

“It’s a battle between the bulls and the bears, and it’s going to be a lot of choppiness until we start seeing inflation data tick down,” said Dennis Dick, a proprietary trader at Bright Trading LLC in Las Vegas.

In a bid to tame rising consumer prices, the Fed on Wednesday raised its key rate by 75 basis points, the biggest hike in nearly three decades, while the Bank of England and the Swiss National Bank also raised borrowing costs.

“The market wants to see results, and there’s no doubt if you continue to raise rates, at some point they’re going to start getting demand destruction... There’s a real risk of the Fed overshooting itself, not hitting the soft landing and throwing us into a recession.” Meanwhile, Fed Chair Jerome Powell once again stressed the central bank’s focus on bringing back inflation to its 2% target while speaking at a conference on the “International Roles of the US Dollar.” At 11:37 a.m. ET, the Dow Jones Industrial Average was nearly flat at 29,925.64, the S&P 500 was up 7.15 points, or 0.19%, at 3,673.92, and the Nasdaq Composite was up 125.68 points, or 1.18%, at 10,771.78.

Six of the 11 major S&P sectors gained. The S&P energy sector fell nearly 20% on the week and was on course to top weekly losses, as crude prices took a hit from global slowdown fears. Still, the sector has rallied 37% this year on soaring oil prices.

Trading is expected to remain volatile due to the expiration of monthly and quarterly options contracts ahead of the Juneteenth market holiday on Monday. Advancing issues outnumbered decliners by a 1.41-to-1 ratio on the NYSE and a 2.50-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week highs and 54 new lows, while the Nasdaq recorded three new highs and 171 new lows.