US stocks have suffered the worst streak of weekly losses in more than a decade after days of tumultuous trading surrounding the Federal Reserve’s decision to raise interest rates by half a percentage point.
The Nasdaq Composite, chock full of interest-rate-sensitive tech stocks, slipped 1.4 per cent on Friday after another whipsaw trading session while the S&P 500 fell 0.6 per cent. Benchmark Treasury yields that underpin borrowing costs across the globe moved higher.
The stock market moves meant both indices lost ground over the full week, each notching their fifth straight week of declines. That represents the worst streak since June 2011 for the S&P 500 and November 2012 for the Nasdaq, when markets were being pummelled by the eurozone debt crisis and the aftermath of the global financial crash.
Trading this week was marked by strong rallies on some days but even sharper sell-offs on others as puzzled investors tried to position themselves for the end of the easy money policies embraced by central banks during the first two years of the pandemic.
“I think there is a lot more pain to come,” said James Masserio, co-head of equities for the Americas at Société Générale, who pointed to a “generational shift in inflation” and a “decade-long shift in monetary policy across the globe”.
Investors initially reacted with relief on Wednesday when the Fed raised its main interest rate 0.5 percentage points, the first rise of that magnitude in more than two decades. That was in part because chair Jay Powell appeared to rule out an even larger rise of 0.75 percentage points for now.
But the initial response was followed by two days of heavy selling.
Analysts and investors offered multiple theories for the sharp gyrations, yet the main mood was one of disorientation.
“There is an enormous amount of confusion in markets,” said Kristina Hooper, chief global market strategist at Invesco.
Stuart Kaiser, head of global equity derivatives research at UBS, noted the downturn was “puzzling”, adding that his team had “found little consistent feedback from investors”.