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Market Snapshot: S&P 500 ends sharply down Friday as stocks suffer first back-to-back weekly loss since September

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U.S. stocks ended lower Friday, booking two straight weeks of losses as recession fears took a toll.

How did stocks trade?

The Dow Jones Industrial Average
DJIA,
-0.85%

fell 281.76 points, or 0.8%, to close at 32,920.46.

The S&P 500
SPX,
-1.11%

fell 43.39 points, or 1.1%, to finish at 3,852.36.

Nasdaq Composite
COMP,
-0.97%

slid 105.11 points, or 1%, to end at 10,705.41.

For the week, the Dow fell 1.7%, the S&P 500 lost 2.1% and the Nasdaq dropped 2.7%. All three indexes booked back-to-back weekly losses for the first time since the week ended Sept. 30, FactSet data show.

Need to Know: Given up on Wall Street? Here’s how stocks could rally 20% next year, says veteran analyst

What drove markets?

Stocks finished lower Friday, booking weekly losses as investors digested interest-rate hikes from central banks and more discouraging signs about the U.S. economy and spending power of the consumer.

The Federal Reserve sent equities down after on Wednesday delivering a 50-basis-point interest-rate hike and indicating its benchmark rate could remain above 5% into 2024.

“The market is coming to terms” with the Fed’s hawkish messaging, said Iman Brivanlou, head of income equities at TCW Group, in a phone interview Friday. “Increasingly, it looks like we’re going to go into a recession.”

Read: Why the consumer is ‘critical’ for investors to watch in 2023 as bear market ‘not yet complete’

Brivanlou said he is defensively positioned, preferring areas such as healthcare and utilities, but wary of consumer staples, as the sector appears relatively expensive compared with other defensive parts of the equities market.

Nearly all of the S&P 500’s sectors finished with weekly losses, with the exception of energy. Still, energy stocks dropped Friday as oil prices
CL.1,
-2.12%

fell to around $74 a barrel.

Markets appeared to be waking up to the notion that the Fed won’t be pivoting back to interest-rate cuts any time soon, said Paul Nolte, portfolio manager at Kingsview.

“Powell has been very consistent with his message to the markets: We’re going to keep raising rates. We’re on this path. We might do it more slowly but we’re not going to stop and pivot,” Nolte said. “It’s just taking the market a while to get comfortable with this.”

Jeffrey Kleintop, chief global investment strategist at Charles Schwab & Co., said the market “bought the rumor” of a decrease in the size of Fed rate hikes from 75 basis points to 50 basis points, and now it’s “selling the news,” because it’s coming with more signs of recession.

Read: Stocks are plunging because the Fed ‘cannot lose the battle’ on inflation`

In economic data released Friday, the S&P Global “flash” U.S. services sector index showed business conditions eroded again in December. Meanwhile, Goldman Sachs Group
GS,
-0.99%

is planning to lay off as many as 4,000 people, Semafor reported Friday, citing people familiar with the matter.

The New York Fed’s John Williams said Friday that interest rates need to top the inflation rate to get prices under control, saying that pricing pressures are still “stubbornly high,” and that he expects rates will hold above 5% next year. Outside the U.S., the European Central Bank was among the central banks that hiked rates this week.

“We are far away from our price stability goal,” San Francisco Fed President Mary Daly said Friday during a virtual event hosted by the American Enterprise Institute, according to a Bloomberg report.

Investors are “beginning to reconcile between their hope” that soaring inflation has already peaked in the U.S. and signs that “the Fed’s resolve isn’t weakening” in battling the high cost of living, said Mark Luschini, chief investment strategist at Janney Montgomery Scott, in a phone interview Friday.

As the trading week wrapped up, a flurry of expiring equity options and futures contracts potentially added volatility to Friday’s session.

Read: Why the stock market’s painful December decline might actually be bullish for investors in 2023

Single-stock movers

Meta Platforms Inc. 
META,
+2.82%

shares rose 2.8%, helping to bolster the Nasdaq as analysts cheered the company’s cost-cutting efforts.

Several real-estate investment trusts focused on corporate properties and logistics centers were under pressure on Friday, including Prologis Inc.
PLD,
-4.72%
,
Invitation Homes Inc.
INVH,
-2.69%
,
Equity Residential 
EQR,
-3.08%
,
Digital Realty Trust 
DLR,
-2.63%

and SL Green Realty Corp. 
SLG,
-4.37%
.

—Barbara Kollmeyer contributed to this article. 

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