Dow drops almost 500 points and sets new yearly low; Nasdaq, S&P 500 also fall

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Stocks recorded another day of losses on Friday as investors continued to worry that an aggressive Federal Reserve will push the economy into recession. The major averages trimmed their losses going into the close, but not before the Dow recorded a new low for the year.

This week’s selloff picked up steam late Wednesday after the Fed announced another rate increase and set expectations of more hikes to come this year. With Friday’s drop, the major averages have now fallen in seven of the last nine sessions, dating back to Sept. 13, when the release of a hotter-than-expected inflation report sent the market spiraling.

The Dow (DJI) ended -1.6%, hitting a low for the session of 29,250.47. This was the index’s lowest mark since November of 2020.

The Nasdaq Composite (COMP.IND) closed -1.8% and the S&P 500 (SP500) ended -1.7%. The S&P 500 reached an intraday low of 3,647.47 — within striking distance of its June low of 3,636.87.

Eventually, the Dow Jones closed at 29,590.41, a drop of 486.27 points on the day. The S&P 500 slipped 64.76 point to finish at 3,693.23, while the Nasdaq retreated 198.88 points to conclude trading at 10,867.93.

All 11 S&P sectors finished lower. Energy was the weakest, tumbling more than 6% as oil prices slide.

“It has been a rough week for stocks, but it has been worse for rates,” Michael Kramer of Mott Capital said of the recent market action. “The biggest development is that credit spreads are now beginning to widen and are either close to or beyond June levels.”

Kramer added that these conditions “suggest that we may see volatility rise and potentially lower stock prices.”

In the bond market, the 10-year Treasury yield (US10Y) moderated a bit after recent gains, dipping 2 basis points to 3.69%. The 2-year yield (US2Y) rose 7 basis points to 4.20%.

In economic news, Global PMI Composite Flash data for September came in higher than expected. Manufacturing PMI rose to 51.8, slightly above the anticipated 51.1. Moreover, services PMI jumped up to 49.2 compared to the forecasted 45.

Oil companies dominate the S&P losers list. Domino’s was a notable gainer after a bullish call from BMO.