S&P 500 set for biggest weekly loss this year as hot inflation stokes Fed fears

By Yasin Ebrahim

Investing.com -- The S&P 500 fell Friday, remaining on course to close out its worst week of the year as data showing inflation remains red-hot stoked deeper fears of the Federal Reserve leaning more aggressive.

The S&P 500 fell 0.93%, and the Dow Jones Industrial Average slipped 0.91%, or 273 points, and the Nasdaq Composite was down 1.6%.

The core personal consumption expenditures price index, or core PCE deflator, the Fed’s preferred inflation metric, gained 4.7% year over year in January, topping economic forecasts for 4.3%.

The hot inflation print arrived just as data showed a stronger-than-expected consumer, strengthening expectations that the Federal Reserve may have to hike by more than previously expected.

“[F]rom the Fed’s perspective, a solid performance from the consumer despite 425bps in tightening suggests not only that individuals and households can withstand a further backup in rates, but also that significantly more tightening is necessary to result in the type of demand destruction necessary to tame inflation,” Stifel said in a note.

Treasury yields added to recent gains following the data, with the 10-year Treasury yield inching closer to the 4% mark, sparking a rout in rate-sensitive sectors of the economy including tech.

Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB), and Apple (NASDAQ:AAPL) were down more than 2%.

Netflix (NASDAQ:NFLX), meanwhile, continued to add to loss from a day earlier even as some on Wall Street believe the streaming giant’s recent announcement to cut subscription prices from 20% to 60% in over 30 countries could boost growth.

“While on the surface these are significant pricing reductions, we believe that the impact to total revenue will be relatively limited given already low ARPUs across these territories," Bank of America said in a note.

On the earnings front, Beyond Meat (NASDAQ:BYND) reported a narrower-than-expected loss in the fourth quarter driven by cost cuts, and said it was on track to churn out positive cash flow in the second half of the year, sending its share price soaring 9%.

UBS said, however, Beyond Meat remains a “show me” story and pointed to concerns “about the company's ability to improve the sales trajectory in a meaningful way, especially if the economic environment deteriorates further.”

Carvana (NYSE:CVNA) fell 5% after the used-vehicle e-commerce platform reported a much wider loss than expected amid rising costs and higher interest rates.

Carvana forecast sales volume to continue to decline in Q1 as it continues its transition to right-size its business following an aggressive growth strategy in the pandemic.

“This transition period “may last for a couple of years before it can refocus on top-line growth,” Deutsche Bank said in a note after cutting its price target on the stock to $10 from $16.

In other news, Adobe Systems (NASDAQ:ADBE) plunged 7% amid reports the U.S. Department of Justice may file an antitrust lawsuit as soon as next month to block the company's $20 billion acquisition of Figma.