Technology stocks extended their declines Friday, dragging broader indexes to weekly losses, as volatility reigned and inflation fears heightened.
Stocks opened the day higher, as traders bought stocks after Russian President Vladimir Putin said in televised remarks that there had been positive developments during talks with Ukraine, even as Russian forces continue to pound Ukrainian cities. By the afternoon, the S&P 500, Dow Jones Industrial Average and Nasdaq Composite had all turned lower, as investors weighed the risk of heading into the weekend holding stocks.
All three indexes finished the week in the red after Friday’s selloff. The Dow industrials closed down about 2% for the period, its fifth consecutive weekly loss. The S&P 500 and Nasdaq Composite lost 2.9% and 3.5%, respectively, for the week, capping the fourth weekly loss in the past five weeks for both indexes. Of the three major indexes, the tech-heavy Nasdaq Composite is down the most so far this year, falling 18% through Friday’s close.
Big swings are now commonplace for major stock indexes, but even by current standards this week’s jumps and falls were extreme, some investors and traders said. On Monday, soaring oil prices sent stocks tumbling, with the S&P 500 posting its worst day in over a year. Two days later, the benchmark index jumped 2.6%, its biggest gain since 2020.
Next week could bring more choppiness. The Federal Reserve meets next Tuesday and Wednesday to vote on whether to raise the base interest rate and by how much. Fed-funds futures, used by traders to wager on interest-rate moves, see a 96% probability of a rate increase of 0.25 percentage point at the meeting. A month ago, they showed a roughly 50% probability of a rate increase of 0.50 percentage point.
Justin Wiggs, managing director in equity trading at Stifel Nicolaus, said the week started out dizzying in terms of the speed of orders coming in. By the end of the week, he said, things slowed, and many clients appeared resigned to the frustrating lack of clarity in the market.
“It’s almost like we’re in purgatory. You’re trying to invest, and there are a lot of things you can’t model,” he said, citing energy price swings, how the war progresses, and the path of rate increases and inflation. “It’s turned, more or less, into a sentiment game.”
The blue-chip Dow Jones Industrial Average ended Friday down 229.88 points, or 0.7%, at 32944.19. The S&P 500 fell 55.21 points, or 1.3%, to 4204.31 while the tech-heavy Nasdaq Composite dropped 286.15 points, or 2.2%, to 12843.81. The S&P 500’s information technology sector was one of several to lose more than 1% on Friday; all 11 were in the red for the day.
“Everyone’s on edge,” said Joseph Amato, chief investment officer of equities at Neuberger Berman Group LLC. The market is ready to bounce back if the Ukraine crisis de-escalates, he said, but markets could also be more volatile and fall further if it worsens.
Investors and traders said they are also bracing for more sanctions imposed on Russia by the West. President Biden said Friday that the U.S. will join major allies and the European Union in moving to revoke normal trade relations with Russia.
Mr. Amato said one of his big concerns is how the crisis in Europe could slow global economic growth and keep inflation at multidecade highs. Thursday’s consumer-price index data in the U.S. showed that inflation last month was largely driven by an increase in energy prices. The data didn’t account for March, when oil prices jumped.
Among this week’s worst performers: technology companies. The Nasdaq Composite entered bear market territory on Monday, defined as falling 20% from its recent high. Rising inflation has pressured tech stocks, traders said, because it can lead to higher interest rates and bond yields that make growth stocks’ promised future cash flows less attractive. The S&P 500 tech sector finished the week 3.8% lower.
Shares of DocuSign tumbled $18.87, or 20%, to $75.01 after the software maker released softer-than-expected guidance. Oracle shares rose $1.17, or 1.5%, to $77.82 after it reported its cloud-business revenues jumped 24% from a year earlier.
Energy companies were standouts this week, rising along with the price of oil. Though energy stocks in the S&P 500 fell on Friday, they were the only sector to end the week positive, up 1.9%. Brent crude futures, the international oil benchmark, were up 3.1% at $112.67. Earlier this week, they traded above $127.
Oil prices are near their highest level in years, despite retreating in recent days. Earlier this week, the United Arab Emirates said it would push the Organization of the Petroleum Exporting Countries to pump more oil, helping assuage some fears about a supply crunch.
Market volatility has sent investors scrambling to rebalance portfolios. Investors in recent weeks have moved in and out of safer assets as news reports about the conflict have quickly changed.