Wall Street collapses as bank, technology stocks fall

Shares close lower on Wall Street, marking their third week of losses in the last four. Banks, tech and industrials all helped pull major indices lower on Friday. The S&P 500 lost 1%. The Nasdaq fell 0.1% and the Dow Jones Industrial Average fell 1.5%. After pushing the S&P 500 to a record high last week, investors have been taking money off the table as the Federal Reserve rolls back stimulus and counters inflation with rate hikes starting sometime next year. The yield on the 10-year Treasury fell to 1.41%.

THIS IS A BREAKING NEWS UPDATE. Following is AP’s earlier story.

Banks and major tech stocks lead another drop on Wall Street during Friday afternoon trading and every major index is on track for a weekly loss.

The S&P 500 fell 0.9% as of 3:35 p.m. Eastern. About 67% of the stocks within the benchmark index were lower. The Dow Jones Industrial Average fell 462 points, or 1.3%, to 35,434. The Nasdaq lost 0.2%.

After taking the S&P 500 to an all-time high last week, investors have been taking money off the table as the Federal Reserve works to roll back stimulus and fight inflation. Both the S&P 500 and Nasdaq are heading for their third weekly decline in the last four.

Technology stocks led the losses as Wall Street prepares for rising interest rates. Oracle fell 6.9% for the biggest drop in the S&P 500, while Adobe fell 2.6%.

Large technology companies often have high valuations based on assumptions about their profitability well into the future. Those valuations tend to be more acceptable to investors when interest rates remain low, but become less desirable as interest rates rise.

The Federal Reserve has signaled plans to accelerate the decline in monthly bond purchases, which has helped keep interest rates low. The shift in policy sets the stage for the Fed to start raising rates sometime next year.

“The cat is a bit out of the bag now and it looks like inflation is something that will be more intractable into 2022,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

Shares of smaller companies outperformed the broader market, pushing the Russell 2000 index up 1%.

Bond yields fell. The yield on the 10-year Treasury fell from 1.42% at the end of Thursday to 1.41%. That put pressure on banks, which depend on higher yields to charge more lucrative interest on loans. JPMorgan Chase fell 2.3%.

Losses were wide in other sectors. A large number of retailers, household goods manufacturers and industrial companies also fell. Home Depot fell 2.8%, Procter & Gamble fell 1.4% and Caterpillar fell 2%.

Sectors considered less risky outperformed the rest of the market. Real estate shares rose slightly. The losses were not as severe for utilities and materials companies.

Some travel-related stocks, including cruise lines, rose. Royal Caribbean gained 6.2%, Norwegian Cruise Line rose 5.3% and Carnival gained 4.4%.

The price of US crude fell 2.1% amid a broad pullback in energy futures. Shares in the energy sector of the S&P 500 fell largely. Chevron fell 1.9%.

The European and Asian markets mostly closed lower.

Wall Street is also gauging the potential impact of rising coronavirus cases with the new ommicron variant. Public health experts in Europe have pushed for greater precautions during the latest wave.

Investors are also considering heightened tensions between China and the US amid an already tense global supply chain. In the US, Congress passed legislation banning all imports from China’s Xinjiang region unless companies can prove they were produced without forced labour.