Losses in tech stocks accelerated on Wall Street on Friday afternoon, pushing the Nasdaq to its biggest monthly loss since the 2008 financial crisis. A sharp drop in Amazon also weighed on indices after the technology giant Internet retail posted its first loss since 2015.
The S&P 500 was down 3.1% at 3:36 p.m. EST, with technology and communications stocks among the biggest drags on the benchmark. The Dow Jones Industrial Average fell 741 points, or 2.1%, to 33,193 and the Nasdaq slipped 3.5%.
Major indexes have oscillated between declines and rallies throughout the week as the latest round of corporate earnings hit the market with a bang. Investors scrutinized a particularly heavy batch of financial results from big tech companies, industrial companies and retailers.
The volatile week caps off a dismal month for stocks as traders worry about the harsh remedy the Federal Reserve is using in its fight against inflation: higher interest rates. This will increase borrowing costs across the board for people buying cars, using credit cards and taking out mortgages to buy homes.
The S&P 500 is on track for an 8.2% loss for April, which would be its worst month since the pandemic began. The Nasdaq is poised to shed 12.7%, which would be its biggest monthly drop since October 2008.
Big Tech led the market lower all month, with traders avoiding the high-flying sector. The tech had made gigantic gains during the pandemic and is now starting to look overvalued, especially with interest rates set to rise sharply as the Fed steps up its fight against inflation.
Internet retail giant Amazon fell 14.2%, the biggest drop in the S&P 500, after reporting a rare quarterly loss and giving investors a disappointing earnings forecast. Amazon’s weak update comes as Wall Street worries about a potential slowdown in consumer spending as well as rising inflation.
Prices for everything from food to gasoline have risen as the economy recovers from the pandemic and there has been a big disconnect between higher demand and lagging supplies. Russia’s invasion of Ukraine has only heightened inflation concerns as it drives up the prices of oil, natural gas, wheat and corn.
The Commerce Department reported Friday that an inflation indicator closely watched by the Federal Reserve jumped 6.6% in March from a year ago, the highest 12-month jump in four decades and further proof that soaring prices are putting pressure on household budgets and the health of the economy.
The latest report on rising US inflation follows a report by statistics agency Eurostat which showed inflation hit a record high in April of 7.5% for the 19 countries that use the euro.
Bond yields rose on hot inflation readings. The yield on the 10-year Treasury fell from 2.85% to 2.89%.
The persistent rise in inflation prompted central banks to raise interest rates to lessen the impact on businesses and consumers.
Much of the anxiety on Wall Street in April focused on how quickly the Fed will raise its benchmark interest rate and whether an aggressive round of hikes will dampen economic growth. The Fed chairman indicated that the central bank may raise short-term interest rates to double the usual amount in upcoming meetings, starting next week. It has already raised its overnight rate once, the first such increase since 2018, and Wall Street expects several big increases in the coming months.
Investors spent much of April shifting money from big tech companies, whose stock values benefit from low interest rates, to areas considered less risky. The S&P 500 consumer staples sector, which includes many home and personal goods makers, is on track to be the only sector in the benchmark to post gains in April. Other safe sectors, such as utilities, held up better than the broader market, while technology and communications stocks were among the biggest losers.