The S&P 500 ended lower on Friday, weighed down by Microsoft and Nvidia as investors worried that inflation and a strong U.S. economy could put the Federal Reserve on pace for more interest rate hikes.
The see-saw session on Wall Street followed economic data this week that pointed to elevated inflation, a tight job market and resilience in consumer spending, giving the Fed more room for to raise borrowing costs.
Goldman Sachs and Bank of America forecast three more rate hikes this year and by a quarter of a percentage point each, up from their previous estimate of two rate rises.
Traders are expecting at least two more rate increases and see the Fed rate peaking at 5.3% by July as central bank attempts to cool the economy and reduce inflation.
“A dark cloud has drifted over the stock market in the last two weeks based on a higher watermark for the Fed funds rate,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.
“The jobs numbers aren’t getting weaker, and it’s hard to go into a recession with a strong labor market at the same time. That means the Fed could push the button and move rates higher,” Dollarhide said.
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