The Dow Jones Industrial Average slumped more than 900 points Friday as another sharp sell-off led by technology stocks added to Wall Street's losses in April, leaving the S&P 500 with its biggest monthly skid since the start of the pandemic.
A sharp drop in Amazon weighed on the market after the internet retail giant posted its first loss since 2015. The decline knocked more than $200 billion off Amazon's market value.
The benchmark S&P 500 fell 3.6% and finished April with an 8.8% loss, its worst monthly slide since March 2020. The Dow slumped 2.8%.
The Nasdaq composite, heavily weighted with technology stocks, bore the brunt of the damage this month, ending April with a 13.3% loss, its biggest monthly decline since the 2008 financial crisis.
Major indexes shifted between slumps and rallies throughout the week as the latest round of corporate earnings hit the market in force. Investors have been reviewing a particularly heavy batch of financial results from big tech companies, industrial firms and retailers.
But some disappointing results or outlooks from Apple, Google's parent company and Amazon helped fuel the selling this week.
"When you start to hear from companies saying that perhaps demand is down, the concerns over a deeper slowdown in the economy gains momentum, and that's where we are," said Quincy Krosby, chief equity strategist for LPL Financial.
Traders also continue to fret about the tough medicine the Federal Reserve is using in its fight against inflation: higher interest rates. The central bank is expected to announce another round of rate increases next week, a move that will further increase borrowing costs across the board for people buying cars, using credit cards and taking out mortgages to buy homes.
"Rising cost pressures and uncertain outlooks from the largest technology names have investors agitated going into the weekend and investors are not likely to be comfortable any time soon with the Fed widely expected to deliver a 50-basis point hike along with a hawkish message next week," said Charlie Ripley, senior investment strategist for Allianz Investment Management.
The S&P 500 fell 155.57 points to 4,131.93 Friday. The benchmark index is now down 13.3% for the year. The Dow dropped 939.18 points to 32,977.21. The Nasdaq slid 536.89 points to 12,334.64. It's down 21.16% so far this year.
Stocks in smaller company also had a rough day. The Russell 2000 slid 53.84 points, or 2.8%, to 1,864.10.
The big technology companies have been leading the market lower all month as traders shun the high-flying sector. Tech had posted gigantic gains during the pandemic and now is starting to look overpriced, particularly with interest rates set to rise sharply as the Fed steps up its fight against inflation.
"Key tech giants have been keeping the stock averages from falling even further than they already have, so it looks like April is going to end on a sour note," wrote Matt Maley, chief market strategist at Miller Tabak + Co., noting benchmark gains Thursday on results from Meta Platforms Inc. "But experience tells us that these kinds of wild intraday moves (and wild day-to-day moves) that we have experienced on many days in recent weeks are signs of an unhealthy market."
Internet retail giant Amazon slumped 14%, one of the biggest decliners in the S&P 500, a day after reporting a rare quarterly loss and giving investors a disappointing revenue forecast. The weak update from Amazon comes as Wall Street worries about a potential slowdown in consumer spending along with rising inflation.
Prices for everything from food to gasoline have been rising as the economy recovers from the pandemic and there has been a big disconnect between higher demand and lagging supplies. Russia's invasion of Ukraine has only added to inflation worries as it drives price increases for oil, natural gas, wheat and corn.
"The consumer is the main driver of the U.S. economy," said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics. "So how the consumer goes, so goes the economy." Bostjancic said that as the Federal Reserve continues to raise rates this year and into next year, "we see more vulnerability for the consumer and risks of a consumer pullback rise."
The Commerce Department on Friday reported that an inflation gauge closely tracked by the Federal Reserve surged 6.6% in March compared with a year ago, the highest 12-month jump in four decades and further evidence that spiking prices are pressuring household budgets and the health of the economy.
The latest report on rising U.S. inflation follows a report from statistics agency Eurostat that shows inflation hit a record high in April of 7.5% for the 19 countries that use the euro.
Bond yields rose following the hot readings on inflation. The yield on the 10-year Treasury rose to 2.92% from 2.85%.
Persistently rising inflation has prompted central banks to raise interest rates in order to temper the impact on businesses and consumers.
Much of the anxiety on Wall Street in April has been focused on how quickly the Fed will raise its benchmark interest rate and whether an aggressive series of increases will crimp economic growth.
"Every time the Fed has spoken, markets have taken it fairly negatively," said Saira Malik, chief investment officer at Nuveen, a global investment manager. "Investors are concerned that with these multiple rate hikes, the Fed is going to cause a recession rather than a soft landing."
Fed Chair Jerome Powell has indicated the central bank may raise short-term interest rates by double the usual amount at upcoming meetings, starting next week. It has already raised its key overnight rate once, the first such increase since 2018, and Wall Street is expecting several big increases over the coming months.
"What's happening here is we're moving away from this period in which a rising tide is lifting all boats," Emily Roland, co-chief investment strategist at John Hancock Investment Management, said on Bloomberg TV. "We no longer have ultra-accommodative Fed policy. We no longer have fiscal stimulus and speculative risk taking. And now we are getting to see what the fundamentals actually look like for technology firms, and we are seeing a big divergence between some of the winners and the losers."
Investors spent much of April shifting money away from Big Tech companies, whose stock values benefit from low interest rates, to areas considered less risky. The S&P 500's consumer staples sector, which includes many household and personal goods makers, was the only sector in the benchmark index to make gains in April. Other safe-play sectors, such as utilities, held up better than the broader market, while technology and communications stocks are among the biggest losers.
Information for this article was contributed by Damian J. Troise and Alex Veiga of The Associated Press, Vildana Hajric and Isabelle Lee of Bloomberg News (WPNS) and Coral Murphy Marcos of The New York Times.