Zinger Key Points
- Markets flipped as negotiations over debt ceiling increase cooled.
- Bank of America's chief investment strategist sees AI becoming a bubble.
- Discover Fast-Growing Stocks Every Month
After a positive start to the session, the stock market turned to the red Friday when House Speaker Kevin McCarthy's representatives stormed out of a private meeting with White House officials, calling the other side "unreasonable" and putting talks over the debt ceiling in jeopardy.
Risk off struck all major indices and virtually all sectors, with a few noteworthy exceptions, such as energy, which was powered by the resilience of oil and natural gas prices. Fed Chair Jerome Powell and former Fed Chair Ben Bernanke delivered monetary policy remarks earlier in the day.
CME Group Fedwatch tool reports that traders' expectations for a rate hike in June dropped from as high as 42% probability earlier in the day to 15%.
Cues From Friday's Trading:
All major averages traded were weaker for the session, with the Nasdaq 100 index dropping nearly 0.5%, the Dow Jones down 0.4% and the S&P 500 down 0.4%.
Small caps were the weakest link, with the Russell 2000 index falling 1%.
| Index | Performance (+/-) | Value | |
|---|---|---|---|
| Nasdaq 100 | -0.45% | 13,794.30 | |
| S&P 500 Index | -0.22% | 4,189.18 | |
| Dow Industrials | -0.42% | 33,412.75 |
Analyst Color:
Michael Hartnett, chief investment strategist at Bank of America, described the AI as a "baby bubble" with inflationary effects for the economy. "Bubbles in right things, such as internet, and wrong things, such as housing, always started by easy money, always ended by rate hikes," Hartnett said.
"We don't advise chasing the bubble in 2023," he said said, noting that more than 200 basis points of Fed rate cuts are already priced in until the 2024 elections.
Friday's Trading In Major US Equity ETFs: In midday trading on Friday, the SPDR S&P 500 ETF Trust SPY was 0.2% lower to $418.40, the SPDR Dow Jones Industrial Average ETF DIA declined 0.6% to $334.20 and the Invesco QQQ Trust QQQ was 0.3% down to $336.30, according to Benzinga Pro data.
Almost all U.S. equity sectors were negative, except for the Energy Select Sector SPDR Fund XLK and the Health Care Select Sector SPDR Fund XLV, which traded up by 1% and 0.5%, respectively.
The weakest performer was the Discretionary Select Sector SPDR Fund XLY, down 1%, and the Communication Services Select Sector SPDR Fund XLC, which was down 0.5%.
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Stocks In Focus:
Foot Locker, Inc. FL dropped 26% after reporting weaker-than-expected financial results last quarter.
Aemetis, Inc. AMTX rose 38%, after rising 17% Thursday, when the company announced approval by the U.S. Environmental Protection Agency of a subsidiary's renewable natural gas production facility.
V.F. Corporation VFC was the S&P 500's worst performer, down 8.4%. The company is will announce its quarterly financial results on Tuesday.
Airbnb, Inc. ABNB fell nearly 4%, the worst performer among Nasdaq 100's components.
- WeWork WE extended drops by 14% to record lows, following headlines of its CEO's departure.
- Nutanix, Inc. NTNX fell over 2.5% and Applied Materials, Inc. AMAT slipped over 1.5% following their respective quarterly results.
- E-commerce retailer Farfetch Limited FTCH soared over 20% on its earnings report.
- Commodities, Bonds, Other Global Equity Markets:
Crude oil edged marginally down by 0.4% to $71.78 a barrel.
The United States Oil Fund ETF USO was 0.3% lower to $63.87 per share.
Treasury yields slightly rose, with the 10-year yield up by 2 basis points to 3.67% and the two-year yield flat at 4.25%. The iShares 20+ Year Treasury Bond ETF TLT was 0.4% lower for the day.
The dollar weakened, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, down 0.4%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.5% lower to 1.0818.
European equity indices closed the session in the green, with the German Dax index approaching record highs. The iShares MSCI Eurozone ETF EZU rose 0.8%.
Gold rose 1% to $1,977/oz. The SPDR Gold Trust GLD was 1% higher to $183. Silver also rose 1.7% to $21.94, with the iShares Silver Trust SLV up 1.8% to $21.94 per share. Bitcoin BTC/USD rose 0.3% to $26,890.
Staff writer Piero Cingari updated this report midday Thursday.
Read Next: Here's What's Happening To Oil As Debt Ceiling Crisis Drags On
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