Stocks fell on Friday to extend a rout in technology stocks, as investors turned away from growth shares in anticipation of tighter monetary policy next year.
The S&P 500 declined. A day earlier, the index closed sharply lower, with the tech-heavy information technology and consumer discretionary sectors leading the way to the downside. And the Nasdaq had underperformed to drop 2.5% to give back all of its gains after a rally on Wednesday.
Shares of FedEx (FDX) jumped after the shipping giant raised its full-year earnings forecast, delivered better-than-expected fiscal second-quarter results and authorized a new $5 billion stock buyback program. Rivian (RIVN), meanwhile, saw shares sink following its first quarterly report since its IPO last month. The electric-vehicle maker said in its shareholder letter it expected to be “a few hundred vehicles short” of its prior target of producing 1,200 units by the end of this year.
Investors’ main focus this week has remained fixed on the Federal Reserve’s updated outlook on monetary policy for next year, with the central bank’s projections delivered mid-week suggesting the Fed could hike interest rates three times next year.
The specter of higher rates — and a lower-liquidity environment as the central bank also speeds up the tapering process of its asset purchases — has continued to weigh heavily on longer-duration technology and growth stocks valued heavily on future earnings potential. The Nasdaq Composite has fallen by 5% over the past month through Thursday’s close. And shares of some notable technology stocks extended declines on Friday, with Apple (AAPL) shares dropping by more than 1% in early trading after a nearly 4% decrease on Thursday.
On the other hand, cyclical stocks in the energy and financials sectors outperformed on Thursday, with the prospects of higher interest rates and stronger growth seen as benefitting these sectors.
“The thing investors have to understand is, we’re going through a major transition in monetary policy,” Troy Gayeski, FS Investments chief market strategist, told Yahoo Finance Live on Thursday. “The Fed has been running emergency policies arguably far longer than they should have been, and as that money supply growth slows down as they ease off the balance sheet expansion and ultimately hike next year, one would at least expect more volatility in markets. And that’s really what we’ve been seeing the last month.”
“The biggest difference between now and six months ago, or even more than a year ago, is you could pretty much go long anything and you were confident it was going to go up. The economy was booming, we had a lot of fiscal stimulus, we still had unprecedented monetary policy stimulus,” he added. “And it’s a very different environment in 2022 where you’re going to have to pick and choose much more carefully.”
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9:30 a.m. ET: Stocks open lower to build on losses
The three major indexes opened in the red and headed for a back-to-back day of losses on Friday, with technology stocks getting hit for another session. The Nasdaq dropped nearly 1% just after the opening bell, while the Dow dropped about 200 points, or 0.5%. The S&P 500 dropped another 0.7%.
The Treasury yield curve flattened as yields on the long end fell Friday morning. The benchmark 10-year yield dropped nearly 3 basis points to below 1.4%.
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7:20 a.m. ET Friday: Stock futures point to a lower open, Nasdaq extends declines
Here’s where markets were trading as of Friday morning ahead of the opening bell:
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S&P 500 futures (ES=F): -12.25 points (-0.26%), to 4,656.50
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Dow futures (YM=F): -12 points (-0.03%), to 35,890
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Nasdaq futures (NQ=F): -104.25 points (-0.66%) to 15,766.25
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Crude (CL=F): -$1.33 (-1.84%) to $71.05 a barrel
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Gold (GC=F): +$11.60 (+0.65%) to $1,809.80 per ounce
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10-year Treasury (^TNX): -1.5 bps to yield 1.407%
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6:01 p.m. ET Thursday: Stock futures steady after tech sell-off
Here were the main moves in markets as the overnight session kicked off on Thursday:
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S&P 500 futures (ES=F): +5.25 points (+0.11%), to 4,674.00
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Dow futures (YM=F): +52 points (+0.14%), to 35,954.00
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Nasdaq futures (NQ=F): +6 points (+0.04%) to 15,876.50
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter