U.S. stocks end lower, Nasdaq snaps 8-week winning streak, on global recession fears

By Isabel Wang and Joseph Adinolfi

Dow industrials down for 5th straight session in longest losing streak since May 25

U.S. stocks ended lower on Friday, with the three major indexes posting their worst week since the collapse of Silicon Valley Bank in March, suggesting a three-month rally may be coming to an end.

For the week, the S&P 500 index was down 1.4%, snapping a five-week winning streak and booking its largest weekly decline since March 10, 2023. The Dow industrials logged a weekly drop of 1.7%, while the Nasdaq fell 1.4%, snapping a eight-week winning streak, according to Dow Jones Market Data.

Meanwhile, investors sought safety in bonds and the U.S. dollar as a wave of interest-rate hikes and hawkish commentary from international central bankers revived worries about global economic growth.

How stocks traded

On Thursday, the Dow industrials fell 4.81 points, or less than 0.1%, to close at 33,946.71. The four-day slide is the blue-chip gauge's longest losing streak since a five-day drop that ended on May 25, according to Dow Jones Market Data.

What drove markets

U.S. stocks finished lower on Friday, snapping the longest stretch of weekly gains since March 2019 for the Nasdaq Composite.

Concerns that interest-rate rises by central banks might harm global economic growth were weighing on global equities on Friday, following rate hikes in the U.K., Switzerland, Norway and Turkey on Thursday.

Data released on Friday also showed business activity in the eurozone losing momentum in June, according to a purchasing managers survey.

See: Global growth outlook deteriorates on central bank rate hikes, raising risks for U.S. and markets

While the Federal Reserve opted to leave interest rates on hold in June, Chair Jerome Powell reiterated in congressional testimony this week that senior Fed officials strongly support hiking rates "a couple of times" later this year

On Thursday though, Richmond Fed President Tom Barkin said he's waiting for the "haze to clear" before deciding on need for more rate hikes. Barkin said that he thinks there is a "plausible story out there" about inflation coming under control. If it doesn't, he said, he is comfortable doing more.

U.S. economic growth may also be slowing. The S&P Global U.S. services index fell to 54.1 in June from 54.9 in the prior month, a two-month low, while the manufacturing index slid to a five-month low of 46.3, from 48.4 in May.

"U.S. stocks are sliding as the global growth outlook continues to deteriorate following soft global PMI readings," Edward Moya, senior market analyst at Oanda, wrote in a note Friday. "The risk of a sharper economic downturn is greater for Europe than it is for the U.S., so that could keep the dollar supported over the short-term."

See:Option demand explodes in June as investors use bullish bets to chase stock-market rally

Ryan Belanger, founder and managing principal at Claro Advisors, is among the analysts who believe the recent stock market's rally was getting ahead of itself.

"The market is too confident that the Federal Reserve can engineer a soft landing and it would be wise for investors to reduce exposure to stocks," Belanger said in emailed commentary.

The market is coming off a rally that is also leading some to conclude that this might be a healthy pullback. The S&P 500 had climbed for five straight weeks through June 16, its longest winning streak since November 2021, Dow Jones Market Data show. Meanwhile, the technology-heavy Nasdaq logged its eighth straight weekly advance last week to mark its longest stretch of gains since March 2019.

"Some of this is a bit of a giveback, and when you look at the market action from the last month and a half, we've kind of gone parabolic," Paul Nolte, senior wealth manager and market strategist at Murphy & Sylvest Wealth Management, told MarketWatch.

See:Bond-market recession indicator is saying 'trouble ahead' for U.S. economy

Defensive assets like the dollar and high-quality sovereign bonds were outperforming on Friday, with the yield on the 10-year Treasury note fell 6 basis points to 3.737% from 3.797% on Thursday. Yields on 10-year U.K. bonds and 10-year German government bonds were down by 10 basis points or more. Crude prices , which are sensitive to expectations for the global economy, fell 0.5% to $69.16 per barrel.

However, U.S. Treasury Secretary Janet Yellen struck an upbeat tone Friday when she said during an interview with Bloomberg that recession risks in the U.S. have faded, "because look at the resilience of the labor market, and inflation is coming down."

For other risky assets, Bitcoin Friday hit its highest level in a year after three financial services giants, BlackRock, Invesco and WisdomTree, filed applications for spot bitcoin exchange-traded funds. Bitcoin traded at $30,856 after hovering above the $31,000 level in early afternoon. The last time Bitcoin traded above that level was on June 8, 2022, when it traded at an intraday high of $31,515.49, according to Dow Jones Market Data.

Companies in focus

Barbara Kollmeyer contributed.

-Isabel Wang

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06-23-23 1635ET

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