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Investing.com — The Dow closed lower Friday, driven by a wreck in tech following a jump in Treasury yields after data pointing to growing expectations for higher for longer inflation stoked investor jitters further about Federal Reserve rate hikes.
The Dow Jones Industrial Average fell 1.3%, or 403 points, the S&P 500 fell 2.3%, the Nasdaq was down 3%.
The University of Michigan showed that the median expected year-ahead inflation rate rose to 5.1%, above the 4.7% seen in September.
A climb in inflation expectations, a closely watched metric by the Federal Reserve, comes just a day after data showed worse-than-feared inflation pressure.
“[W]e see drivers of disinflation on the horizon, most notably from a reversal in vehicle prices and a downshift in medical services,” Morgan Stanley said. “Risks are tilted towards more Fed tightening this year,” it added.
Treasury yields climbed, with the 10-year yield topping 4%, as the odds for a 0.75% Fed rate hike for November are now almost fully priced in.
Rising rates weighed heavy on growth sectors of the market including tech and consumer discretionary stocks.
Apple Inc (NASDAQ:AAPL), down 3%, led big tech lower, with Microsoft Corporation (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) down more than 2%.
Major Wall Street banks, meanwhile, kicked off the quarterly earnings season in earnest, with mostly better-than-expected quarterly results.
JPMorgan Chase & Co (NYSE:JPM) rose more than 2% after reporting better-than-expected third-quarter results, as rising interest rates boosted net interest income offsetting weakness in investment banking revenue.
Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) also reported better-than-expected quarter results, but Morgan Stanley (NYSE:MS) bucked the trend as weaker performance in its investment banking business weighed on results.
Tesla (NASDAQ:TSLA) slumped more than 7% dragging consumer discretionary stocks lower after Wells Fargo cut its price target on the stock to $230 from $280 a share, citing worries about the impact of higher interest rates.
The price cut comes just a week ahead of the electric automaker’s third-quarter results slated for Oct. 19.
In deal news, Albertsons (NYSE:ACI) fell more than 8% on reports that Kroger (NYSE:KR) had agreed to purchase the Safeway owner in a deal valued at $24.6 billion, or $34.10 a share.
