U.S. stocks rose on Friday but still logged their worst weekly declines since the height of the pandemic in 2020, as concerns over the prospects of a recession remained elevated.
The S&P 500 ended higher by 0.2% on Friday to settle at 3,674.79. That brought its one-week decline to 5.8%, or the biggest since March 2020. The Nasdaq jumped 1.4% during the session as badly beaten down tech names recovered some recent losses, though the index still dropped 4.8% since last week. The Dow erased earlier intraday gains to close lower, and the 10-year Treasury yield pulled back to about 3.2%. Crude oil prices sank, and West Texas intermediate futures fell below $109 per barrel to an about one-month low.
The major averages logged another week of steep losses as traders considered the likelihood and timing of a potential recession. While signals of an economic slowdown have been brewing for months now, heightened fears of a more significant downturn resurged in just the past week alone. That came especially after last Friday's Consumer Price Index showed inflation remained at multi-decade highs even following the Federal Reserve's initial moves earlier this year to raise interest rates and bring down demand and prices.
And with the Fed now turning even more aggressive — starting with its first 75 basis point interest rate hike since 1994 on Wednesday — the potential for a slide in economic activity as the central bank trades some growth for lower inflation appears increasingly likely. Fed Chair Jerome Powell reiterated on Friday that the central bank remained "acutely focused on returning inflation to [the Fed's] 2% objective."
"The market is reevaluating what the odds of a recession are in the near-term and what the actual downside on earnings and what the recession will really look like," Ross Mayfield, Baird investment strategy analyst, told Yahoo Finance Live on Thursday. "But to me, it's a fairly kind of tidy story about higher interest rates, more aggressive Fed, and multiple times in the past that leads to some sort of financial crisis or recession. I think the market's trying to price the odds of that."
And that pricing recalibration has so far brought the S&P 500 24% below its Jan. 3 record closing high. But stocks likely still have further to fall if history is any indication, some strategists said.
Deutsche Bank, one of the first major banks to call for a 2023 recession earlier this year, pointed out that the S&P 500's current decline from its peak is so far in-line with the median drop seen amid recessions post-World War II. Currently, it's the fourth worst non-recession correction over that period, Deutsche Bank's Jim Reid said in a note Friday morning. But when recessions materialize, bear markets for stocks tend to deepen.
"The timing of the recession is a hot topic at the moment. When it hits, both [Binky Chadha, Deutsche Bank chief U.S. equity and global strategist] and I would expect the S&P 500 to be down -35 to -40% from the highs," Reid said. "The rationale from [Chadha] being that the initial overvaluation was more extreme than normal cycles, with my additional comment being that this recession marks a regime shift from decades of declining inflation to higher structural levels. This deserves a bigger de-rating than average."
On the move
Gainers
Alibaba (BABA) shares soared following a Reuters report that the People's Bank of China had accepted Ant Group's application to create a financial holding company. Alibaba shares rose more than 5% on the New York Stock Exchange Friday just after market open, and other U.S.-listed Chinese firms also saw their share prices increase.
American Express (AXP) shares gained after Baird upgraded the Dow component as well as peer payment companies Capital One, M&T Bank and Fifth Third to Outperform from Neutral, according to Bloomberg. Baird noted that the "risk/reward finally [looks] attractive for bank and card names" in the wake of the latest selling pressures for the space.
Centene (CNC) shares gained after the healthcare company raised its full-year guidance ahead of its investor day. The company now sees adjusted earnings per share coming in between $5.55 and $5.70, up from a prior range of between $5.40 and $5.55.
Decliners
Adobe (ADBE) shares declined after the company slashed its full-year revenue outlook to account for greater tax and currency headwinds, and the impact of its decision to end sales in Russia and Belarus amid the war in Ukraine. The company now sees full-year sales totaling $17.7 billion compared to a prior outlook for $17.9 billion.
Match Group (MTCH) shares slid to a record low of $67.25 apiece on Friday, extending declines seen across tech and growth names in recent weeks. Shares of peer dating app company Bumble also fell sharply intraday.
Advent Technology (ADN), a fuel cell and hydrogen technology developer, saw shares sink more than 10% in early trading. The move came a day after the stock skyrocketed by more than 200%, after the company announced it received a funding notification for about $821 million for a fuel cell development project in Greece.
This post will be updated.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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