The Fed lifted rates from near zero last December – the first rate hike in almost a decade – but has since stood pat given an economic slump at home and volatile markets overseas. Energy companies, which have also gained a lot this year, took a drubbing as the price of crude oil fell.
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Higher rates typically hurt the stock market, as they make it more expensive for corporations to borrow. Now 2.8 percent from its all-time high, the S&P 500 trades at 18.2 times forecast earnings, still the highest since at least 2009.
The large-cap S&P 500 Index (NYSEARCA:SPY) plunged 2.5%, with all ten main sectors declining more than 1%.
The tech-heavy Nasdaq Composite was off 2.5% at 5,125, losing 125 points over the course of the week.
Rosengren’s comments drove the US dollar firmly higher, while the yield on the 10-year Treasury note (http://www.marketwatch.com/story/treasury-yields-hit-post-brexit-highs-on-hawkish-fed-comments-2016-09-09) jumped to levels hit before the U.K.’s June 23 vote to break from the European Union roiled global markets.
JPMorgan Chase fell 0.5% to 66.89 in the stock market today, as it was downgraded on Friday by Macquarie Research.
The signs of a rough day appeared early on Friday as the market opened lower.
Earlier on Friday, Boston Fed President Eric Rosengren said in a speech that the Federal Reserve risks overheating the economy if it delays raising rates. Economists fear that low unemployment and low interest rates can spark inflation, forcing them to carefully tailor interest rate policy between stimulating the economy and controlling inflation. While investors and economists see a slight chance of a hike at a Fed policy meeting in two weeks, a move in December is seen as more likely. “But September can not be ruled out at this point”.
The continued weakness among treasuries came as comments from some Federal Reserve officials led to renewed concerns about a near-term interest rate hike.
German 10-year yields rose to zero for the first time since July after the European Central Bank downplayed the need for more stimulus.
BEATEN UP: High-dividend stocks like utilities and phone companies slumped amid growing speculation of a Fed interest rate hike, which helped drive bond yields higher.
Interest rates on long-term US government bonds also shot up on fears of a coming rate hike, perhaps as early as the Fed’s September 20-21 meeting. AT&T was down 99 cents, or 2.4 percent, to $40.21, while Verizon slid $1.24, or 2.3 percent, to $52.37.
The dollar index .DXY , which tracks the USA currency against a basket of six currencies, rose 0.35 percent to 95.366.
Falling oil prices hurt several oil and gas production and drilling companies.
The S&P Midcap 400 closed down 0.5% at 1,574 while the S&P Smallcap 600 shed 0.3% to 763.
Not all stocks had a rough day.
GOOD QUARTERS: Furniture and housewares retailer Restoration Hardware and fiber optic components supplier Finisar rose on strong quarterly results. Restoration Hardware gained $1.94, or 5.5 percent, to $37.23.
Barrick Gold lost 2.9 percent to C$23.15, as the price of gold slipped, while Goldcorp Inc declined 2.1 percent to C$20.92.
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Stocks turn sharply lower as Fed officials weigh on monetary policy.
