A Jittery Week Ends With the S&P 500 Breaking Below 5,000

Stocks faced renewed downward pressure as major technology shares saw a decline, while traders exercised caution ahead of the weekend amidst geopolitical uncertainties.

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Equities closed the week with a decline, marking the S&P 500's descent below 5,000 following a rally that propelled the benchmark to record highs, prompting concerns of a consolidation phase. A series of hawkish remarks from Federal Reserve officials and signs of increasing inflationary pressures dampened market sentiment, leading investors to scale back their expectations regarding the eagerly awaited central bank policy shift. Although recent tensions in the Middle East appeared contained, traders adopted a more careful approach.

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Nevertheless, Fawad Razaqzada of City Index and Forex.com cautioned that market volatility could persist, particularly in light of potential weekend risks. He noted that inflation data remains a significant focal point for traders due to its potential implications for the Federal Reserve's monetary policy decisions.

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Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, remarked on the recent decline in the stock market, attributing it to diminishing expectations of interest rate cuts and investors' profit-taking following the strong market performance in the first quarter.

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The S&P 500 is currently on course for its sixth consecutive decline, marking its longest losing streak since October 2022. Notably, Netflix Inc. faced a downturn due to pessimistic forecasts, while Apple Inc. approached its lowest closing level in nearly a year.

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Meanwhile, Treasury 10-year yields experienced a three basis point decline to 4.60%, nearly offsetting an earlier plunge of 14 basis points. The performance of the US dollar remained uncertain, while oil prices retreated from their session highs.

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The stock market is heading towards its third consecutive weekly decline, marking its lengthiest losing streak since September.

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A note from a Bank of America Corp. team led by Michael Hartnett highlighted a shift in investor sentiment, indicating that positive economic news now triggers negative reactions in the stock market. This is evidenced by the $21.1 billion redeemed from stock funds in the past two weeks, the largest outflow in a fortnight since December 2022, according to data from EPFR Global.

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In the latest Bloomberg monthly survey, economists lowered the probability of a recession within the next 12 months to 30%, the lowest level since June 2022 and down from 35% last month. Respondents also adjusted their expectations for the upper boundary of the Fed's benchmark interest rate, now projected to fall to only 4% by the end of 2025, half a percentage point higher than estimates from just a month ago. The median projection suggests only two quarter-point rate cuts this year.

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Ana Botin, Executive Chairman of Banco Santander SA, expressed optimism about the global economy despite geopolitical uncertainties, citing higher interest rates, robust employment, and growth as beneficial factors for lenders.

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"So far, we are experiencing a smooth transition," Botin said in an interview. "Everything seems to be going well."

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