Wall St Tumbles As Investors Fret On Weak Earnings, Rate Hikes

Wall Street slumped to a lower close on Friday, ending a whipsaw week of surprise earnings news and increased certainty around aggressive near-term interest rate rises, which also pushed them into negative territory for the week.

It was the third straight week of losses for both the S&P 500 and the Nasdaq, while the Dow Jones posted its fourth weekly decline in a row.

All three indexes were trading more than 2% down for much of the afternoon on Friday.

Exaggerated trading swings have become more common recently, as traders adjust to new data points from earnings, as well as when rates will rise again. For the Nasdaq, it had already posted seven session in April, out of 14 trading days prior to Friday, where the index either rose or fell by more than 2%.

"It's not very common, over the course of my time doing this job, for the market to move 2% in either direction and to think 'there's not too much to read into that'," said Craig Erlam, senior market analyst at OANDA.

"That's not normal, but that's just how things have been for such a long time now."

Concerns about risks from interest rate hikes continued to reverberate after Federal Reserve Chair Jerome Powell's hawkish pivot on Thursday, where he backed moving more quickly to combat inflation and said a 50-basis-point increase would be "on the table" when the Fed meets in May.

The idea of "front-end loading" the U.S. central bank's retreat from super-easy monetary policy, which Powell articulated support for on Thursday, has also forced traders to re-evaluate how aggressive subsequent rate rises would be.

The CBOE Volatility index, also known as Wall Street's fear gauge, soared on Friday.

Meanwhile, the latest earnings forecasts to jolt investors came from healthcare, with HCA Healthcare and Intuitive Surgical Inc among the worst performers on the S&P 500.

HCA slumped after reporting a downbeat profit view, while other hospital operators felt the contagion, including Tenet Healthcare, Community Health Systems and Universal Health Services.

Surgical robot maker Intuitive Surgical dropped after it warned of weaker demand from hospitals due to tighter finances.

All 11 major S&P 500 sectors were lower, although healthcare was not the only industry suffering.

Materials was weighed by Nucor Corp - down after hitting a record high after posting earnings on Thursday - and Freeport-McMoRan Inc, which slipped as investors fretted over how interest rate hikes would impact copper miners.

According to preliminary data, the S&P 500 lost 121.68 points, or 2.77%, to end at 4,271.84 points, while the Nasdaq Composite lost 335.09 points, or 2.54%, to 12,839.56. The Dow Jones Industrial Average fell 973.22 points, or 2.80%, to 33,819.54.

The prospect of a more hawkish Fed has led to a rocky start to the year for equities, in particular tech and growth shares whose valuations are more vulnerable to rising bond yields.

Earnings are due next week for the four biggest U.S. companies by market capitalization: Apple, Microsoft, Amazon and Google parent Alphabet.

The quartet, as well as Meta Platforms Inc, which also has results on deck for next week, suffered a sell-off on Friday.

Investors are worried after streaming giant Netflix Inc's dismal earnings earlier this week sent shockwaves through big tech and stay-at-home darlings which benefited from pandemic factors such as lockdown measures.

Among other companies that reported results, Gap Inc tumbled after the apparel company cut its forecast for quarterly sales, blaming execution challenges at its Old Navy brand and "macro-economic dynamics."

Verizon Communications Inc fell after disappointing full-year earnings forecast.

However, Schlumberger NV gained after reporting a higher first-quarter profit, as rising oil prices due to Russia's invasion of Ukraine boosted the demand for oilfield services and equipments.