US Stocks falls on rate hike concerns

The US stock market finished session deeply in negative territory on Friday, 24 February 2023, on rekindled concerns about stringent interest rate cycle after the Federal Reserve's preferred inflation gauge showed a stronger-than-expected increase in prices last month as costs for goods and services both rose.

At the close of trade, the Dow Jones Industrial Average index stumbled 336.99 points, or 1.02%, to 32,816.92. The S&P500 index was down 42.28 points, or 1.05%, to 3,970.04. The tech-heavy Nasdaq Composite Index declined 195.46 points, or 1.69%, to 11,394.94. For the week, the S&P 500 was down 2.7%, the Dow fell almost 3%, and the Nasdaq closed 3.3% lower.

Total 9 of 11 sectors ended lower along with the S&P500 Index. Real estate was the worst performing sector, falling 1.82%, followed by Information technology (down 1.77%), consumer discretionary 9down 1.56%) and communication services (down 1.43%). Material was top performing sector, rising 0.65%.

Commerce Department data showed that personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure, accelerated by 0.6% in January, faster than the 0.2% gain in December. On an annual basis, PCE rose to 5.4% in January from a 5.3% gain in December. Core prices, stripping out fuel and food, rose 0.6% and 4.7% for the month and year , respectively.

Hotter-than-expected inflation could encourage the Fed to keep interest rates higher for longer. The market expects the central bank to raise rates by a quarter of a percentage point in March and again in May. The policy rate is expected to reach 5.36% by mid-summer and could remain elevated for the rest of 2023.

In corporate news, Boeing shares slipped more than 4% after the company temporarily halted delivery of its 787 Dreamliners following new issues with a fuselage component.

Adobe shares closed lower after reports that the Justice Department is preparing an antitrust lawsuit seeking to block the company's $20 billion acquisition of startup Figma.

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