Stocks retreated Friday as a surge in the 10-year Treasury yield prompted broader concerns about the state of the economy.
The S&P 500 shed 1.26% to 4,224.16 and registered its first losing week in three. The Nasdaq Composite dropped 1.53% to 12,983.81. The Dow Jones Industrial Average lost 286.89 points, or 0.86%, to end at 33,127.28, dragged down in the session by American Express following a mixed earnings report.
The yield on the benchmark 10-year Treasury crossed 5% for the first time in 16 years on Thursday, a level that could ripple through the economy by raising rates on mortgages, credit cards, auto loans and more. Not to mention, it offers investors an attractive alternative to stocks.
The 10-year yield hit 5.001% around 5 p.m. ET Thursday, the first time it has traded above that level since July 2007. It retreated from that threshold through Friday.
"The stock market is watching the bond market and doesn't like what it sees," said David Donabedian, chief investment officer of CIBC Private Wealth Management. "Yields are rising, even with the relatively good news about inflation. This is the primary reason the stock market has been weak."
The 30-year U.S. Treasury yield also hit a high last seen in July 2007. Meanwhile, the 30-year fixed mortgage rate reached 8% this week, a level not seen since 2000.
Regional banks tumbled as higher rates raised worries about the sector's exposure to Treasury securities that are falling in value. Regions Financial led the decline after a weak earnings report, falling more than 12%. The SPDR S&P Regional Banking ETF (KRE) lost 4%.
American Express shares dipped more than 5%. The company's earnings per share beat expectations, but revenue was about in line with estimates. Non-interest revenue, meanwhile, missed a StreetAccount consensus forecast.
Solar stocks were also among the biggest decliners. The move came after SolarEdge slashed its third-quarter revenue guidance, sending the stock down 27%.
Concerns over higher rates weighed on the market during the week. The S&P 500 lost 2.4% on the week, while the Dow slipped 1.6%. The Nasdaq shed 3.2%, notching its second straight week of losses.
Nvidia, the closely followed artificial intelligence stock, was on pace for its worst week since September 2022 with a loss of nearly 9%. It was one of multiple semi stocks that struggled this week after the U.S. Department of Commerce announced plans to tighten restrictions on sales of advanced artificial intelligence chips to China.
Tesla ended the week more than 15% lower, its worst week since December 2022. The electric vehicle maker, which reported earnings on Wednesday, missed Wall Street expectations on both lines for the first time since 2019.
Stocks closed a losing day and week.
The Dow finished Friday's session about 0.9% lower. The S&P 500 and Nasdaq ended down by 1.3% and 1.5%, respectively.
Friday's slide extended losses on the week. The Dow finished about 1.6% off on the week, while the S&P 500 shed 2.4%. The Nasdaq was the worst performer this week, dropping 3.2%.
— Alex Harring
Following a broader selloff amongst solar stocks, Deutsche Bank delivered another blow to the downtrodden industry as it downgraded three names.
The bank downgraded shares of SolarEdge, Sunrun, and Sunnova on Friday morning. Upon news that European demand was waning, shares of SolarEdge plummeted in the session and dragged on other solar stocks.
"We believe 3Q23 earnings will likely be another setback for the solar industry, as sluggish demand continues in the US on the residential side, as well as further signs of weakness in some key European countries," wrote analyst Corinne Blanchard. "We believe it will take another 6 to 9 months until we could see improvements and a potential recovery into 2H24."
CNBC Pro subscribers can read the full story here.
— Lisa Kailai Han
The stock market likely won't stabilize until the bond market does, according to David Grecsek, managing director of investment strategy and research at Aspiriant.
Investors have paid particularly close interest to bond yields this week as the 10-year U.S. Treasury yield crossed the 5% level for the first time since 2007. Going forward, Grecsek said the bond market will need to become less volatile for the stock market to.
"The bond market actually has been the leading indicator for the equity market," he said. "In order for the equity market to really stabilize and consolidate here, the rate volatility's got to calm down a little bit. And it's going to be hard for equities to really settle down until that happens."
— Alex Harring
Okta shares plummeted more than 12% after it disclosed that hackers breached its support system, accessing files from some customers.
The company said the system was accessed using stolen credentials, but the breach did not impact its customer offerings.
— Samantha Subin, Rohan Goswami
Traders should remain focused on quality in the same vein as stock picking when considering adding duration to bonds, according to Douglas C. Lane & Associates managing director and partner Sarat Sethi.
"[W]hen you do go out three to five years, make sure that the credit that you're holding is of high quality and not cyclicals and not companies that are going to have to go back to the market very shortly or that are depending on advertising," Sethi told CNBC's "Power Lunch" on Friday. "Just like when you do stock picking, you gotta be careful on the bond picking side too, and know that your spread is commensurate to the risk that you are taking."
— Brian Evans
The Dow fell 200 points on Friday and headed for a 1.4% weekly decline, led to the downside by a 7.8% drop in shares of Walgreens Boots Alliance.
Caterpillar's shaved off 6.8% this week, while American Express has shed 5.8%. Other notable decliners include JPMorgan Chase, Apple and Intel with weekly losses totaling about 3% each.
Just six Dow stocks are on pace to finish the week with gains. McDonald's is on track to post the largest weekly jump of the group, with shares up 4%. Coca-Cola and Verizon have each added more than 3%, while Nike's risen 2.8%.
— Samantha Subin
Citi is optimistic about Cognizant shares given the technology company's strong growth outlook.
"Despite macro uncertainty, Cognizant has seen solid bookings momentum since late 2022 and we expect these trends to continue in 3Q23 with a healthy large deal pipeline remaining," analyst Ashwin Shirvaikar said. "Although there is still macro uncertainty heading into 2024 as well as uncertainty around when discretionary spend pressures will ease, this bookings momentum gives Cognizant higher visibility into 2024 and a baseline for growth as these deals ramp."
CNBC Pro subscribers can read more here.
— Lisa Kailai Han
Stocks were on pace for notable losses with one hour left in the trading day and week.
The Dow and S&P 500 slid 0.5% and 0.9% in the session, respectively, as of shortly before 3 p.m. ET. The Nasdaq Composite was down by 1.1%.
Friday's slide deepened losses on the week. The S&P 500 and Nasdaq Composite are poised to end the week 2.1% and 2.8% lower, respectively. The Dow is on track to finish 1.4% in the red.
— Alex Harring
U.S. high-grade bond funds recorded $2.41 billion in outflows this past week ending Oct. 18, according to Bank of America. This marked a sharp reversal from the prior week, which recorded $2.08 billion in inflows. Credit strategist Yuri Selliger attributed the negative flows mostly to outflows from short-term high-grade bond funds.
High-yield bonds and global emerging market bonds also had outflows accelerate, with the two categories recording $1.84 billion and $2.16 billion in negative flows, respectively. Money markets reported a $101.12 billion outflow this week, sharply dropping from $8.33 billion in outflows from a week earlier.
Meanwhile, equity flows stayed nearly flat over the same period. Stocks recorded a $1.43 billion outflow.
— Hakyung Kim
The S&P 500 slipped below its 200-day moving average of 4,233.25 for the first time since March 24. The index has not closed below the 200-day since March 17.
The index traded near the 200-day earlier this month, but appeared to bounce off the level. Such a move can sometimes be a positive sign for the market, but technical analysts were skeptical that the rally would have staying power.
— Jesse Pound, Gina Francolla
The unprecedented success of the "Barbie" movie could propel Mattel stock upwards for years to come, according to Citi.
"The crowning jewel of MAT's new content strategy has been the resounding success of 2023′s live-action Barbie film, which has grossed $1.4B as of mid-October, placing it in the top 15 highest grossing films of all time," analyst James Hardiman said. "Building on the Barbie phenomenon, Mattel has a number of films and TV shows in development, with the aim to grow the value of its IP portfolio and compete with growing alternatives for children's attention."
CNBC Pro subscribers can read the full story here.
— Lisa Kailai Han
A few closely followed technology stocks are on pace to post weekly moves not seen in 2023.
Tesla and Nvidia are on pace for their worst weeks since December and September of 2022, respectively. Tesla has dropped more than 14%, while Nvidia has slid around 8%.
Tesla's slide this week came as investors reacted to the electric vehicle maker's weaker-than-expected earnings report. Nvidia's tumble came on the heels of a U.S. Department of Commerce announced that it plans to tighten restrictions on sales of advanced artificial intelligence chips to China.
On the other hand, Netflix is slated for its best week since October 2022. The streaming giant's nearly 14% rally this week came as investors cheered the company's earnings and subscriber numbers.
— Alex Harring
Consumer staples and energy stocks in the S&P 500 have been able to avoid the market's slide this week.
The two sectors are up more than 1% on the week, while communication services is around flat and the remaining 8 are on pace for losses. As a whole, the broad index has dropped 1.8% this week.
Rallies of more than 5% in Lamb Weston, Monster Beverage and Mondelez helped the consumer staples sector this week. Meanwhile, Valero and Phillips 66 have climbed more than 4% and 3%, respectively, giving a boost to the energy sector.
Real estate and consumer discretionary have performed the worst of the 11 sectors this week, with both poised for losses of nearly 4%.
— Alex Harring
Check out the companies making headlines in midday trading.
Read here for the full list.
— Pia Singh
Cleveland Federal Reserve President Loretta Mester said Friday she expects that interest rates likely won't be raised much more from here, if at all.
"Regardless of the decision made at our next meeting, if the economy evolves as anticipated, in my view, we are likely near or at a holding point on the funds rate as we accumulate more information on economic and financial developments and assess the effects of the tightening in financial conditions that has already occurred," Mester said in remarks delivered for a speech in New York.
The central bank official added that she agrees with Federal Open Market Committee estimate in September that another rate hike could come before the end of 2023, but noted that handicapping such moves is difficult now.
Mester is not a voting member of the FOMC this year but will vote in 2024.
—Jeff Cox
The Nasdaq Composite and concentrated Nasdaq-100 fell about 1% on Friday, putting the indices on pace to fall more than 2% for the week.
Enphase Energy is the biggest laggard on the tech-heavy index, tumbling more than 19% since the start of the week. Moderna's slumped more than 17%, while Lucid Group and Tesla are slated to drop more than 14% each for the week. Tesla fell 9% on Thursday after the electric vehicle stock reported disappointing results and shares cautious commentary.
Nvidia is another notable laggard. The chipmaker's on pace to finish the week 8% lower after selling off on the back of new AI chip export curbs to China. Lam Research and Marvell Technology are down more than 5% each since the start of the week. Meanwhile, China-based e-commerce company JD.com is headed for a nearly 10% weekly loss.
Some stocks have managed to buck the technology sector's broader weekly downtrend. That included Dexcom and Netflix, up more than 13% each since the start of the week. Netflix reported strong quarterly results after the bell Wednesday and posted strong subscriber numbers.
— Samantha Subin
Investors aren't considering the full value of Merck's "underappreciated pipeline readouts," according to UBS.
The bank upgraded Merck stock to a buy rating on Friday. Shares of the stock have slid more than 9% since the start of the year.
"With the current macro environment uncertain, we believe Pharma stocks with high near-term growth and relatively lower downside risk should outperform lower-growth peers," wrote analyst Trung Huynh. "Merck encompasses these attributes with solid growth (2022-27E EPS 4.8% vs. peers' 2.6%), driven by Keytruda and Gardasil entering a consistent growth phase and largely unaffected by IRA Medicare price negotiation until 2028."
CNBC Pro subscribers can read the full story here.
— Lisa Kailai Han
Nvidia shares gave up an early gain to trade more than 2% lower on the day.
It wasn't clear what sparked the turnaround. However, Friday's decline put Nvidia down more than 9% for the week. That would be Nvidia's biggest weekly loss since September 2022.
— Fred Imbert
Shares of Regions Financial fell more than 12% on Friday after the regional bank's third-quarter result missed expectations.
Regions reported 49 cents in earnings per share, below the 58 cents expected by analysts, according to FactSet's StreetAccount.
The bank also missed estimates for net interest income and net interest margin. And Regions warned that it expected net interest income to decline in the fourth quarter.
Regions was not the only mid-sized bank stock under pressure on Friday. The SPDR S&P Regional Banking ETF (KRE) fell nearly 3%.
— Jesse Pound
Solar stocks tumbled on Friday after solar product manufacturer Solaredge warned that demand in Europe has significantly weakened, furthering battering sentiment on the renewable energy sector amid a difficult year.
The Invesco Solar ETF (TAN) tumbled 5.6% Friday to its lowest level since July 2020, led down by Solaredge. Other stocks in the solar sector also fell on the pessimistic outlook. Enphase Energy and U.S.-traded shares of SMA Solar Technology fell more than 12%, followed by SunPower down 11.4%.
Solaredge tumbled more than 25% Friday after it said revenue, gross margins and operating income in the third-quarter would be below what Wall Street was expecting, and added that it estimates "significantly lower" revenue in the fourth-quarter.
More about the downturn can be found here.
— Hakyung Kim