Shares plunged Friday, with the Dow Jones Industrial Average suffering the worst one-day loss since the violence of the pandemic, as the latest string of corporate earnings and the prospect of rising interest rates spurred a sell-off.
The Dow index fell 981.36 points, or 2.8%, to 33,811.40. The S&P 500 was 2.8% lower at 4,271.78, the worst day since March. The Nasdaq Composite fell 2.6% to 12,839.29. Friday’s loss was the biggest for Dow since October 28, 2020.
UnitedHealth fell more than 3% and shaved more than 100 points from the Dow. Caterpillar also took nearly 100 points out of the average of 30 stocks, down 6.6% on the day. Goldman Sachs, Home Depot and Visa were also major downward contributors.
These losses reduced the Dow index by 1.9% for the week, its fourth consecutive weekly drop and its ninth loss week of the last 11. The S&P 500 had a weekly loss of 2.8%, marking its third move in one week fold. Nasdaq was the laggard this week, losing 3.8%.
Companies that reported disappointing quarterly results led to the market decline on Friday. HCA Healthcare fell 21.8% and was the worst performing stock in the S&P 500. The decline came as the company had weak expectations for earnings and revenue for the full year.
“Investors seem to be moving away from TINA’s ‘there is no alternative’ narrative lately when it comes to equities,” said Brian Price, head of investment management for the Commonwealth Financial Network. “This is the second week in a row with significant outflows from equity funds, and days like today will hardly change the mood going forward. “
It led other names in the healthcare sector lower. Intuitive Surgical and Universal Health Services each lost 14.3%. DaVita fell almost 9.2% and DexCom fell 6.7%.
Verizon shares fell 5.6% after the company reported a loss of 36,000 monthly phone subscribers in the first quarter.
Shares in Gap fell 18% after the company announced that the CEO of its Old Navy division, Nancy Green, is leaving the company this week. Gap also reduced its outlook for growth in net sales in fiscal year 2022.
“This is all about Powell’s comments, but the cautionary remarks about future sales growth in so many earnings announcements drive home the crucial point: fighting inflation will inflict some pain,” said Jeanette Garretty, chief economist at Robertson Stephens Wealth Management.
Friday’s action followed a dramatic turnaround Thursday after a speech by Federal Reserve Chairman Jerome Powell that lowered market sentiment. Powell said during a panel from the International Monetary Fund that taming inflation is “absolutely crucial” and a 50 basis point increase is on the table in May.
“Central banks’ politeness and rising bond yields are once again moving markets,” Ross Mayfield, Baird’s investment strategy analyst, told CNBC. “Nothing particularly new, but a fresh reminder of the monumental shift that is underway on the political front. Powell noted that there may be benefits to front-loading increases and being aggressive early, this puts them up for the potential to to cut back later if the economy stumbles. “
Prices on Thursday jumped on Powell’s remarks. On Friday, the leading 10-year government bond yield fell slightly to around 2.9%.
When asked about the potential of a 75 basis point increase, Loretta Mester, president of the Federal Reserve Bank of Cleveland, told CNBC’s “Closing Bell” on Friday “we do not need to go there,” and said she would support and 50 basis. point hike in May.
“Despite April with the strongest average price increase since World War II and the second-highest rate of advance, the prospect of a more aggressive Federal Reserve tightening in response to an inflation rate not seen since the early 1980s continues to weigh on stocks and investor nerves, “Sam Stovall, investment strategist at CFRA Research, told CNBC.