Stock market today: Dow falls as stocks notch two consecutive down weeks

By Liz Moyer

Investing.com -- U.S. stocks notched a second week of losses as investors worry about a recession in the new year. 

At 16:01 ET (21:01 GMT), the Dow Jones Industrial Average was down 282 points or 0.8%, while the S&P 500 fell 1.1% and the NASDAQ Composite was down 1%. The indexes were heading toward their second straight weekly decline and the first negative December in four years. 

The gloomy holiday mood is being stoked by fears about the Federal Reserve's aggressive actions to stop inflation in its tracks, with the help of other central banks around the world. The Bank of England and the European Central Bank joined it in saying rates would stay higher for longer. That also weighed on hopes for a Santa rally in December.

The S&P 500 was down more than 2% this week and 6% for the month. Friday’s trading included options expiring, adding to the day’s volatility, but the Dow climbed back from being down 547 points at its lowest. Amid broad-based selling, real estate and utilities were the lagging sectors. But big company stocks also fell including McDonald’s Corporation (NYSE:MCD), down 2.1%, and Home Depot Inc (NYSE:HD), down 1.3%.

This week, the Fed signaled it wasn’t done with raising rates and even indicated its benchmark rate would probably rise above 5% next year, which is higher than investors expected just a few weeks ago. Hawkish comments by several Fed officials since then have only reinforced the Fed's message. San Francisco Fed President Mary Daly said she and her colleagues aren't close to achieving their goal of lowering inflation. “We still have a long way to go,” Daly said Friday. “We are far away from our price stability goal.”

Now, the policy rate is expected to rise to 5.1% next year, the Fed said, a level it hasn’t reached since 2007. Gross domestic product growth is expected to slow, the Fed said, and unemployment is expected to rise.

While the Fed slowed the pace of its rate hiking to a half percentage point, it isn’t expected to stop raising rates next year. The market is anticipating at least two increases of at least a quarter point each next year.

Manufacturing PMI data on Friday was slower than expected, reading 46.2 versus the expected 47.7. Services PMI was 44.4, slower than the 46.8 expected. Data on Thursday showed retail sales slowed in November more than expected while the labor market continued to show strength as unemployment claims unexpectedly fell.

Adobe Systems Incorporated (NASDAQ:ADBE) shares rose 2.9% after the company issued a forecast for first-quarter profit that was above expectations. Darden Restaurants (NYSE:DRI) stock fell 2% despite beating expectations and raising its outlook.