US stocks see worst week of 2023
3 min read . Updated: 25 Feb 2023, 06:50 PM IST 
Premium- Recent data has undermined the idea the Fed could cut rates later this year
U.S. stocks pulled back Friday, notching their worst weekly performance of the year, as hot economic data have rekindled worries about restrictive Federal Reserve policy.
The S&P 500 fell 42.28 points, or 1.1%, to 3970.04. The technology-heavy Nasdaq Composite dropped 195.46 points, or 1.7%, to 11394.94. The blue-chip Dow Jones Industrial Average shed 336.99 points, or 1%, at 32816.92. The three indexes all dropped more than 2% in the holiday-shortened week, each logging their biggest weekly declines of 2023.
The losses are the latest in a turbulent stretch for the market. The major indexes climbed to start 2023, with many investors betting that moderating inflation could lead the Fed to cut interest rates later this year, but the outlook has muddied in recent weeks.
Investors’ enthusiasm has quickly waned after a string of reports have indicated the U.S. is seeing stickier-than-expected inflation and a resilient economy, keeping the door open for the Fed to maintain aggressive monetary-tightening measures in order to cool price pressures.
“The market is recalibrating and acknowledging that the path toward price stability is fraught with obstacles," said Quincy Krosby, chief global strategist for LPL Financial. “The market is telling us to be careful, with a Fed that has to vanquish inflation and hurt the economy to do it."
Adding to those worries on Friday: January’s personal-consumption-expenditures price index overshot economists’ expectations. The core reading excluding food and energy, considered the Fed’s preferred gauge of inflation, rose 4.7% year on year. That was ahead of consensus forecasts for a 4.4% increase.
Short-term Treasury yields, which closely track investors’ interest-rate expectations, shot up Friday to levels not seen in more than a decade after the release of the strong inflation data. The yield on the two-year Treasury note rose to 4.803% on Friday, the highest since 2007.
Meanwhile, the benchmark 10-year Treasury yield advanced to 3.948% on Friday from 3.879% on Thursday. Bond yields rise as prices fall.
Federal-funds futures, used by traders to wager on the course of interest rates, on Friday reflected bets that the central bank will bring interest rates significantly higher than most investors expected a month ago.
“The perception of monetary policy and where it’s headed has changed dramatically," said David Donabedian, chief investment officer at CIBC Private Wealth US. “What’s currently priced in today is more realistic versus what people were pricing in right after the Fed meeting" ending Feb. 1, he said.
Still, with the economy proving more durable in the face of higher interest rates than many had expected, some investors are becoming more hopeful that the Fed could be able to tame inflation without inflicting too much economic pain.
“It’s not quite Goldilocks, but if we get an environment where growth holds up, which it is so far, inflation continues to come down and the Fed can ease up with interest rates, that is a pretty good environment," said Brian O’Reilly, head of market strategy at Mediolanum International Funds.
Boeing Co. led decliners in the Dow on Friday, with its stock falling $9.98, or 4.8%, to $198.15 per share after the plane maker halted deliveries of 787 Dreamliner jets because of a documentation issue.
Warner Bros. Discovery Inc. shares retreated 18 cents, or 1.1%, to $15.55 per share after the entertainment giant’s quarterly revenue missed expectations and its chief executive warned that the U.S. advertising market remains very challenging.
Shares of Carvana dropped $2.07, or 21%, to $8.01 per share after the online used-car seller reported a wider-than-expected quarterly loss and sales that missed analysts’ estimates
Front-month futures contracts for Brent crude oil jumped 1.2% to $83.16 a barrel. The international oil benchmark has fallen this month as a sharp rise in U.S. crude inventories prompted concerns that oil demand in the world’s largest economy is stalling.
Overseas, Asian indexes were mixed. In Japan, the Nikkei 225 rose 1.3% after the nominee to lead the Bank of Japan said inflation, now running at a four-decade high, would soon fall without a rise in interest rates. In Hong Kong, the Hang Seng Index fell 1.7%, while China’s Shanghai Composite eased 0.6%.
European markets were broadly lower. The pan-continental Stoxx Europe 600 lost 1%.