U.S. stocks end mixed, but book weekly losses as Dow suffers longest losing streak since 1932

For the week, the Dow fell 2.9%, the S&P 500 dropped 3.1% and the Nasdaq slid 3.8%, according to Dow Jones Market Data.

What drove markets?

Friday morning’s bounce was short-lived, with all three major stock benchmarks showing sharp losses in afternoon trading before ending mixed at the closing bell.

The early rally provided an opportunity for traders to “lighten up on exposure” ahead of the weekend, selling amid “growing uncertainty and anxiety” about the direction of the economy as the Federal Reserve raises interest rates to fight high inflation, according to Wayne Wicker, chief investment officer at MissionSquare Retirement.

“Investor psychology is driving a lot of this,” Wicker said in a phone interview Friday, referring to the selloff.

The S&P 500 slipped into bear-market territory Friday afternoon, but skirted finishing there. A bear market is defined by a fall of at least 20% from a recent peak.

Read: The S&P 500 narrowly averts a bear market. How long do they last once they arrive?

“Stocks remain on a shaky footing. Investors’ list of worries grows ever larger,” said Fawad Razaqzada, market analyst with City Index and Forex.com, in a note.

“Inflation. Interest-rate hikes. Low economic growth. Stagflation. Recession. Perhaps most importantly for stocks, the Fed is not there to provide cushion, like before,” he wrote.

Stocks were initially buoyed after the People’s Bank of China on Friday cut in its rate on five-year loans, aimed at shoring up weak housing sales by reducing mortgage costs. The country has been battling COVID outbreaks, with lockdowns in industrial hubs such as Shanghai blamed for weak factory and consumer activity data in April.

But analysts said the move also underlined concerns.

“Where the rest of the world is thinking of raising rates because of inflation, they’re cutting rates in order to help the economy,” said JJ Kinahan, chief market strategist for online brokerage firm tastytrade Inc., in a phone interview Friday. “I think that’s a little bit of a warning sign,” as U.S. companies that benefit from demand in China may be hurt by a slowing Chinese economy as well as supply-chain disruptions linked to the country’s lockdowns, he said.

Consumer discretionary was the worst performing sector in the S&P 500 index Friday, falling 1.5%, according to FactSet data.

Friday was the final day of trading before the expiration of options tied to stocks and exchange-traded funds, which was seen potentially contributing to volatility during the session.

Major U.S. stock indexes booked another week of losses, with investors worried about whether soaring inflation can be brought under control by the Federal Reserve without derailing the economy.

The Dow saw its eighth straight weekly decline, marking its longest losing streak since April 1932, according to Dow Jones Market Data. The S&P 500 and Nasdaq Composite each fell for a seventh straight week, their longest losing stretch since March 2001.

Major retailers this week, such as Walmart WMTand Target TGT reported disappointing profits, against a backdrop of rising expenses and inflation.

Mark Hulbert: Here’s the real reason the stock market is coming unglued — and it isn’t because of weak earnings

This past week has shown that the risk of economic downturn, fears that high inflation is cutting into corporate performance and rising borrowing costs remain the major worry for markets, particularly after Fed Chairman Jerome Powell said the central bank “won’t hesitate” to lift rates beyond neutral to curb high inflation, according to Christian Stocker, lead equity sector strategist at UniCredit Bank in Munich.

“In this environment, investor sentiment is fickle and markets are likely to remain choppy to both sides until there is greater clarity in terms of recession, rates, and geopolitical risks,” Stocker said.

The U.S. economic data calendar was empty for Friday, but next week will bring another round of inflation data and personal consumption expenditure prices.

Which companies were in focus?

• Shares of Ross Stores Inc.
  ROST,
  -22.47%
  slumped 22.5% after the retailer became the latest to report disappointing quarterly results and trim its outlook, blaming higher inflation and rising freight and wage costs.

• Deere & Co.
  FROM,
  -14.07%
  shares dropped 14.1% after the agriculture, construction and forestry equipment maker reported better-than-expected fiscal second-quarter profit and revenue.

• Applied Materials Inc.
  AMAT,
  -3.86%
  shares fell 3.9% after the chip-equipment maker reported a miss on profit, revenue and forecast amid continued supply chain woes.

• Foot Locker
  FL,
  +4.09%,
  the athletic footwear and apparel retailer, saw its shares rise 4.1% after it reported first-quarter profit that beat expectations.

How did other assets fare?

• The yield on the 10-year Treasury note 
  TMUBMUSD10Y,
  2.791%
  fell 6.9 basis points to 2.785%. Yields and debt prices move opposite each other.

• The ICE U.S. Dollar Index 
  DXY,
  +0.29%,
  a measure of the currency against a basket of six major rivals, was up 0.3%.

• Bitcoin 
  BTCUSD,
  +0.47%
  was off 3.3% at $29,229.

• Oil futures
  CL.1,
  -0.47%
  rose, with West Texas Intermediate crude for the most active July contract rising 0.4% to settle at $110.28 a barrel.

• In gold futures 
  GC00,
  +0.21%,
  gold for June delivery edged up less than 0.1% Friday to settle at $1,842.10 an ounce. The yellow metal rose 1.7% for the week, breaking a string of four consecutive weekly declines, according to Dow Jones Market Data.

• In European equities, the Stoxx Europe 600 
  SXXP,
  +0.73%
  closed 0.7% higher Friday but slipped 0.5% for the week. London’s FTSE 100 
  UKX,
  +1.19%
  ended 1.2% higher Friday and booked a weekly decline of 0.4%.

• In Asia, the Shanghai Composite Index
  SHCOMP,
  +1.60%
  finished 1.6% higher Friday for a weekly gain of 2%. The Hang Seng Index HK:HSI jumped about 3% Friday, bringing its weekly gain to 4.1%. Japan’s Nikkei 225 JP:NIK rose 1.3% Friday for a weekly gain of 1.2%.

—-Barbara Kollmeyer contributed to this report.