In This Article:
By Stephen Culp
NEW YORK (Reuters) - U.S. stocks ended sharply lower and Treasury yields headed higher on Friday as plunging chip stocks and mixed economic data dampened investors' risk appetite, providing a downbeat ending to a tumultuous week.
All three major U.S. stock indexes closed deep in red territory, with chipmakers weighing on the tech-laden Nasdaq.
The S&P 500 and the Nasdaq reversed their weekly advances, while the blue-chip Dow ended the week nominally higher.
The Philadelphia SE Semiconductor index slid 3.0% in the wake of a Reuters report that Taiwan's TSMC asked major suppliers to delay delivery of high-end chipmaking equipment.
On the economic front, data released on Friday was mixed, with import prices jumping, industrial production beating expectations and University of Michigan consumer inflation expectations cooling.
Economic indicators this week have cemented expectations that the Federal Reserve will leave its key interest rate unchanged at the conclusion of next week's monetary policy meeting, and fueled hopes that the central bank's tightening cycle might have run its course.
"There's a tug of war going on between those who think inflation and interest rates are going to come down and the Fed is going to start cutting rates next year, and those who believe that inflation is going to stay well above the Fed target for a while and therefore rates will stay higher for longer," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.
Financial markets have priced in a 97% likelihood that the central bank will hold the Fed funds target rate at 5.25%-5.00% when it announces its decision next Wednesday, and a 68.5% likelihood of it doing the same at the conclusion of its November meeting, according to CME's FedWatch tool.
"If we get a pause in September and November, that could lead to a nice year-end rally, which will feed the belief that the next move by the Fed will be a rate cut in 2024," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
The Dow Jones Industrial Average fell 288.87 points, or 0.83%, to 34,618.24, the S&P 500 lost 54.79 points, or 1.22%, to 4,450.31 and the Nasdaq Composite dropped 217.72 points, or 1.56%, to 13,708.34.
European stocks closed higher, extending a rally sparked by the European Bank signaling an end to its rate-hiking cycle, and logging a weekly gain.
The pan-European STOXX 600 index rose 0.23% and MSCI's gauge of stocks across the globe shed 0.63%.