Stocks close lower on Friday, extending sell off for worst week since June for S&P 500 and Nasdaq

Pro Picks: Watch all of Friday's big stock calls on CNBC
Pro Picks: Watch all of Friday's big stock calls on CNBC

Stocks fell Friday as Wall Street wrapped up one of its worst weeks in months and traders reacted to an ugly earnings warning from FedEx about the global economy.

The Dow Jones Industrial Average dropped 139.40 points, or 0.45%, to close at 30,822.42. The S&P 500 shed 0.72% to end the week at 3,873.33. The Nasdaq Composite slid 0.90% to finish at 11,448.40. It was the worst week for the S&P 500 and Nasdaq since June.

Shares of FedEx plunged 21.4%, their worst daily drop ever, after the shipments company withdrew its full-year guidance and said it will implement cost-cutting initiatives to contend with soft global shipment volumes as the global economy "significantly worsened."

Transport stocks are typically seen as a leading indicator for the stock market as well as the economy, and FedEx pointed to weakness in Asia as one of the main reasons for its negative outlook. Shares of shipping rivals UPS and XPO Logistics dropped about 4.5% and 4.7%, respectively, and Amazon's stock fell 2.1%.

FedEx's announcement comes soon after a hotter-than-expected inflation report in the U.S. on Tuesday, which raised concerns that the Federal Reserve will be forced to cause a recession to cool prices. That data sparked a decline of more than 1,200 points for the Dow.

"There is a lot of nervousness about how the global economy can affect the U.S. economy now, while the U.S. economy is dealing with its own set of very serious issues. I think that dynamic is what people have woken up to," said Callie Cox, U.S. investment analyst at eToro.

The three major averages suffered their fourth losing week in five, and the summer comeback rally looks increasingly like a bear market bounce. The Dow Jones Industrial Average declined 4.1% this week. The S&P 500 lost 4.8%, while the Nasdaq Composite dropped about 5.5%.

Lea la cobertura del mercado de hoy en español aquí.

Stocks close lower on Friday, Nasdaq sheds more than 5% for the week

The major averages closed lower again on Friday, their third negative day in four, to round out an ugly week for Wall Street. The Nasdaq was the worst performer for the day, down about 0.9%, and for the week, losing more than 5%.

— Jesse Pound

"Stagflation" isn't here just yet, Goldman's Hussey says

This week's mixed economic numbers, hot inflation reading and FedEx warning have brought the dreaded prospect of "stagflation" back into view. The term typically refers to the 1970s, when the U.S. economy suffered from low growth and persistently high inflation for much of the decade.

However, Goldman Sachs still sees a "soft landing" as a possibility, and Goldman's Chris Hussey wrote on Friday that the economy hasn't stagnated just yet, even after negative readings for GDP to start the year.

"In the same month that Fed Ex warned global shipments fell (August), the US added 315,000 net new non-farm payroll jobs and the unemployment rate rose only 20bp to a still ultra-low 3.7%. Importantly, wage inflation remains high but it did slow from July's pace. The US labor market is just not exhibiting many signs of 'stag,'" Hussey said.

— Jesse Pound, Michael Bloom

Goldman strategists see a 4% 10-year yield and 4.3% for the 2-year next year

Goldman Sachs rate strategists expect the U.S. 10-year yield to peak at 4% by the end of 2023, and the 2-year at 4.3% by the second quarter.

The benchmark 10-year yield was lower at 3.44% Friday afternoon. The 2-year yield was at 3.85%, after rising above 3.9% earlier in the day.

Goldman Sachs strategists had previously expected a high this year of 3.3% in the 10-year but changed that forecast to 3.75% due to higher expectations for Federal Reserve rate hikes.

The strategists said in a note that they expect the front end of the curve to lead yields higher, and that the so-called "flattening" of the curve has also peaked. The yield curve inverted when the yield of the 2-year rose above the 10-year yield.

Patti Domm

FedEx warning could be one of many negative earnings revisions

FedEx's warning about its business could be just one of many earnings estimate downgrades from companies and Wall Street analysts in the coming months.

As fears of a recession began to rise this summer, many portfolio managers and strategists have predicted that projected earnings growth for 2023 will prove to be too high.

While that projected earnings number has slowly slipped in recent months, it still shows more growth than a recession could likely support, suggesting that some harsh cuts could be in the pipeline.

"Earnings tend to adjust with a lag. The market sort of reacts ahead of those downward revisions. So some of the weakness, and certainly if it continues from here, is really starting to price in those coming downgrades," Jake Jolly, senior investment strategist at BNY Mellon Investment Management.

— Jesse Pound

The biggest losers in the markets this week

The markets struggled across the board this week, but not all stocks were hit equally.

In the S&P 500, Adobe and FedEx fell around 25% and 23%, respectively. Nucor, Eastman Chemical and International Paper rounded out the top five worst week over week performers within the index, with each posting losses of around 16%.

All five far outpaced the index's weekly loss of 3.8%.

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Boeing and Dow, Inc. each dropped nearly 9% week over week, making them the biggest losses in the Dow Jones Industrial Average. That's about double the index loss of 4.7%.

Home Depot, Honeywell and Microsoft followed, all falling around around 8% this week.

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— Alex Harring

Market breadth weak again on Friday

Declining stocks in the S&P 500 outnumber advancers by more than 4-to-1 on Friday, continuing a sharp reversal in market breadth and investor sentiment caused by Tuesday's CPI report.

"This year has been riddled with technical false starts. Few times in history have the A/Ds been so positive leading into a day with such overwhelming selling pressure," Frank Gretz, technical analyst at Wellington Shields, wrote in a note to clients. "There's always a risk in reading too much into one day, knee-jerk sort of reactions. Then too, the numbers say the report may have shifted investors' mindset. They now suddenly believe what the Fed has been screaming."

— Jesse Pound

Markets selling off on triple witching day

Friday's sell-off is taking place on a "triple witching" day, which means there could be heightened market volatility as the end of the session draws nearer.

On triple witching days, options on stocks, stock indexes, and stock futures expire at the same time. these events take place four times a year and are associated with choppy trading action and high volumes.

— Fred Imbert

Bond yields give up early gains

The Treasury market appeared to calm down in midday trading after a volatile week.

The 2-year Treasury yield, which jumped above 3.9% on Friday morning, is now little changed for the day near 3.87%. The 10-year Treasury yield is slightly lower. Yields move opposite of price.

The long-end of the curve is seeing the biggest moves today, with the 30-year Treasury yield rising more than 3 basis points to 3.517%.

— Jesse Pound

UBS still bullish on Amazon

UBS believes Amazon shares remain attractive, particularly because of the ecommerce giant's retail growth.

"Between Census data and a possible 2nd Prime Day, we feel good about the retail business," analyst Lloyd Walmsely wrote in a note.

The firm reiterated its buy rating for Amazon, which is its top pick in the ecommerce space and in its overall internet coverage.

Shares of the commerce giant were down more than 3% in midday trading.

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— Michelle Fox

Dow Transports dips to levels last seen in February 2021, dragged by FedEx

The Dow Jones Transportation Average tumbled as much as 6% Friday morning, reaching a low last seen in February 2021. The index is on pace for its worst day since May 18 when it slumped 7.41%.

A sharp decline in shares of FedEx is dragging the Dow Transports index. The shipments company's share price tumbled more than 22%, dipping on disappointing news. On Thursday, FedEx withdrew its full-year guidance and announced it would close 90 offices, five corporate locations and defer hiring.

The Dow Transports' performance is particularly notable because the index is deemed a leading indicator for the economy's trajectory.

Darla Mercado, Gina Francolla

Oil rises, but on track for losing week

Oil prices advanced on Friday but were still set for a third straight week of declines as macroeconomic concerns weigh. Traders fear that a global economic slowdown would cut demand for oil and other petroleum products.

West Texas Intermediate crude futures, the U.S. oil benchmark, added 0.7% to trade at $85.68 per barrel on Friday. For the week it's down roughly 1.3%.