NEW YORK/LONDON: Risk aversion dominated markets on Friday as stocks slumped on Wall Street and in Europe, oil prices fell from seven-year highs earlier in the week and bond prices surged with traders scurrying for the relative safety of government debt.
Poor subscriber growth reported late Thursday at Netflix Inc sent its shares plunging 21.8% and cast a pall over a market already shaken by concerns the Federal Reserve will tighten monetary policy too aggressively to fight inflation.
Investors are waiting for details from the Fed's policy meeting next week on how it will proceed at a time that inflation is such a hot political issue it could force a more hawkish stance.
Data, however, won't begin to show an expected slower pace of rising consumer prices for at least a few months, making Fed Chair Jerome Powell's job more difficult as he tries to calm markets.
"We know the Fed is beginning to pivot and the problem is that the inflation numbers are not going to start to trend lower until later this spring," said Andrew Slimmon, a managing director at Morgan Stanley Investment Management.
Despite the negative Netflix earnings, it's too early to know whether corporate fundamentals won't continue to be strong, he said.
In Europe, the German, French and Italian indices fell almost 2%, with the broad Euro STOXX index of 600 leading regional companies closing down 1.84%. MSCI's all-country world index fell 1.74%.
On Wall Street, the Dow Jones Industrial Average slid 1.30%, the S&P 500 fell 1.89% and the Nasdaq Composite lost 2.72%. Both the S&P 500 and the Nasdaq posted their biggest weekly declines since the market crashed in March 2020.
With the Fed posed to hike interest rates as many as four times this year, fear of a hard landing has risen among investors. But a slowing economy in the months ahead will probably give the Fed second thoughts, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC.
"By the time we get to the second rate hike, everything will be rolling over enough that everybody will back off from these calls," he said. "The growth numbers will be slowing much more quickly than the Fed anticipated."
U.S. Treasury and euro zone government bond yields fell as concerns about potential conflict in Ukraine also dented risk appetite and stock market drops increased demand for the debt.
The yield on 10-year Treasury notes fell 7.2 basis points to 1.762%, a sharp drop from a two-year high of 1.902% touched on Wednesday.
Markets overnight in Asia were broadly lower, including in China where benchmark mortgage rates were cut on Thursday in the latest move to prop up an economy soured by its property sector.
The U.S. dollar edged lower with U.S. Treasury yields, with investors looking to next week's Fed meeting for more clarity on the outlook for rate hikes and quantitative tightening.
The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.138% to 95.627. The yen was last down 0.40% at $113.6300. The euro was last up 0.30 percent at $1.1344,
Oil prices slid for a second day, pressured by an unexpected rise in U.S. crude and fuel inventories while investors took profits after global oil benchmarks touched seven-year highs.
Brent crude futures fell 49 cents, or 0.6%, to settle at $87.89 a barrel, while U.S. futures settled down 41 cents at $85.14 a barrel.
Gold was set to gain for a second week as inflation and geopolitical risks lifted its safe-haven appeal, but it slipped on Friday amid a broader decline in commodities.
U.S. gold futures settled down 0.6% at $1,831.80 an ounce.- Reuters
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Wall Street's main indexes ended sharply lower on Friday as Netflix shares plunged after a weak earnings report, capping a brutal week for stocks that saw the S&P 500 and Nasdaq log their biggest weekly percentage drops since the onset of the pandemic in March 2020.
The benchmark S&P 500 posted its third straight week of declines, ending 8.3% down from its early January record high.
Losses also deepened for the Nasdaq after the tech-heavy index earlier in the week confirmed it was in a correction, closing down over 10% from its November peak. The Nasdaq has now fallen 14.3% from its November peak and on Friday closed at its lowest level since June.
Netflix shares tumbled 21.8%, weighing on the S&P 500 and the Nasdaq, after the streaming giant forecast weak subscriber growth. Shares of competitor Walt Disney fell 6.9%, dragging on the Dow, while Roku also slid 9.1%.
"It has really been a continuation of a tech rout,” said Paul Nolte, portfolio manager at Kingsview Investment Management. "It’s really a combination of a rotation out of technology as well as very poor numbers from Netflix that I think is the catalyst for today."
The Dow Jones Industrial Average fell 450.02 points, or 1.3%, to 34,265.37, the S&P 500 lost 84.79 points, or 1.89%, to 4,397.94 and the Nasdaq Composite dropped 385.10 points, or 2.72%, to 13,768.92.
For the week, the S&P 500 fell 5.7%, the Dow dropped 4.6% and the Nasdaq declined 7.6%.
The Dow fell for a sixth straight session, its longest streak of daily declines since February 2020.
The S&P 500 closed below its 200-day moving average, a key technical level, for the first time since June 2020.
"When markets get like they've gotten this week, the emotion is what takes over," said Jim Paulsen, chief investment strategist at The Leuthold Group. "Until it finds support, no one's going care about anything fundamental."
Stocks are off to a rough start in 2022, as a fast rise in Treasury yields amid concerns the Federal Reserve will become aggressive in controlling inflation has particularly hit tech and growth shares.
Investors are keenly focused on next week's Fed meeting for more clarity on the central bank's plans to tighten monetary policy in the coming months, after data last week showed U.S. consumer prices in December had the largest annual rise in nearly four decades.
“Between the Fed meeting and earnings, there is a lot that the market could be worried about next week,” said Anu Gaggar, global investment strategist at Commonwealth Financial Network.
Apple, Tesla and Microsoft are among the large companies due to report next week in a busy week of earnings results.
Declining issues outnumbered advancing ones on the NYSE by a 4.26-to-1 ratio; on Nasdaq, a 4.34-to-1 ratio favored decliners.
The S&P 500 posted five new 52-week highs and 24 new lows; the Nasdaq Composite recorded 13 new highs and 1,029 new lows.
About 14.6 billion shares changed hands in U.S. exchanges, compared with the 10.4 billion daily average over the last 20 sessions.- Reuters