Investing.com — The S&P 500 stumbled on Friday, holding course for another weekly loss as rising yields blunted tech stocks and a drop in consumer sentiment to six-month lows sparked a move higher. caution on Wall Street.
The fell 0.6%, the fell 0.5%, down 154 points, and the slipped 0.8%
The slump in tech stocks lost momentum as Treasury yields regained momentum after Federal Reserve officials suggested further rate hikes could not be ruled out as inflation remains too high and tight labor markets.
“If inflation remains elevated and the labor market remains tight, further monetary policy tightening is likely to be appropriate,” Fed Governor Michelle Bowman said on Friday.
Apple Inc (NASDAQ:) led the move lower in Big Tech, followed by Meta (NASDAQ:) and Microsoft Corporation (NASDAQ:), although Alphabet Inc (NASDAQ:) bucked the trend to trade flat after the tech giant agreed to pay $8 million to settle allegations of misleading advertising to promote its Pixel 4 smartphone.
Data showing a bigger than expected fall to 63.5 in April, the lowest reading since last November, and long-term consumer inflation hitting a 12-year high also weighed on sentiment.
Consumer stocks, including Amazon.com Inc (NASDAQ:), Carnival Corporation (NYSE:) and Norwegian Cruise Line Holdings Ltd (NYSE:) were among the hardest hit.
The difficulties of regional banks continued to weigh on the market as a whole, with PacWest Bancorp (NASDAQ:) down 3% after announcing that it had pledged more guarantees to the Fed to enable it to borrow an additional $3.9 billion from the central bank’s emergency lending facilities.
The regional banking crisis is likely to worsen further as many banks are exposed to low-yielding assets at a time when rising interest rates are forcing them to offer more attractive rates of return, driving up their costs. funding and putting pressure on their margins.
The banking turmoil is something that’s “likely getting worse, which means people will be less interested in lending money, even three months from now, than they are today,” the chief strategist said. of Spouting Rock Asset Management Rhys Williams to Yasin Ebrahim of Investing.com in an interview Thursday.
“I think it’s a big issue for the economy and supportive of slowing GDP,” Williams added.
In the news of transactions, Premier Solaire Inc. (NASDAQ:) jumped 25% after the solar company announced an agreement to acquire Evolar AB for up to $80 million to accelerate its development of photovoltaic technology.
On the political front, there were some hopes for progress in talks in Washington between lawmakers on legislation to raise the debt ceiling and avert default by the United States on its debt.
US credit default swaps, insurance against bad debts, on Treasuries have risen in recent days, suggesting concerns about a default are growing.
The probability of a US debt default is around 2%, according to Williams, although he adds that markets could sell off as the risk of a no-deal on raising the debt ceiling the debt is growing, but any loss would be recouped quickly once a deal is announced.
“We could easily have a 5% or 10% drop in equities before a deal, but we’ll get it back as soon as the deal is announced,” Williams said, adding that a 60/40 stock-bond portfolio allocation would allow to reduce the risk of default.
“If there is a default, government bonds will go up because it is very negative for the economy and bank stocks will lose money and bonds will gain money,” he added.