Wall Street’s main indexes ended sharply lower on Friday, and the S&P 500 and Nasdaq had their biggest weekly drops since the beginning of the pandemic in March 2020.
Risk aversion dominated financial markets during the last trading week, while the weak quarterly report from Netflix added further pressure on the S&P 500 and the Nasdaq.
Netflix shares weakened more than 20% after the company reported disappointing quarterly subscriber growth and provided forward guidance below estimates. John Lynch, chief investment officer for Comerica Wealth Management, added:
The pandemic winners are under pressure, and that will likely continue. If everybody already has Netflix, it’s hard to improve subscriber growth.
Investors remain concerned about the impacts of the pandemic, inflation, and supply-chain issues, and they will continue to pay close attention to the fourth-quarter earnings reports to determine if these will crimp profit margins or if costs can be passed through.
Next week, Apple, Tesla, Chevron, Caterpillar, Johnson & Johnson, Microsoft, Boeing, AT&T, Kimberly-Clark, and Intel are among the companies scheduled to report quarterly results.
The last week’s sell-off can also be attributed to the Federal Reserve as the U.S. central bank announced that it was planning at least three interest rate hikes this year.
U.S. consumer prices in December had the largest annual rise in nearly four decades, and the U.S. Federal Reserve is likely to meet market expectations for a 25-basis-point rate hike in March.
Morgan Stanley expects that the Fed would set out a more aggressive tone to fight inflation after the March rate hike.
Morgan Stanley expects the Fed to deliver a total of four 25 basis-point rate increases this year, but the central bank’s policy meeting next week will
