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Investing.com – The S&P 500 fell for the second-straight week Friday as selling intensified into the close on signs elevated inflation is hurting the consumer as the Russia-Ukraine war is set roll into its third week ahead of the Federal Reserve rate hike.
The S&P 500 fell 1.3%, the Dow Jones Industrial Average fell 0.7%, or 230 points, the Nasdaq fell 2.2%.
Consumer discretionary stocks led the broader market lower as investors digested data pointing to a wobble in consumer sentiment in the wake of surging inflation that ratcheted up a notch following the Russia-Ukraine war.
Tesla (NASDAQ:TSLA), Las Vegas Sands (NYSE:LVS), and Etsy Inc (NASDAQ:ETSY) led the losses in consumer discretionary stocks, with the latter falling by more than 11%.
The March University of Michigan Consumer Sentiment index, which is negatively correlated with inflation, fell to 59.7 from 62.8, the lowest level since September 2011.
“This latest leg down [in the survey] surely reflects the recent spike in gasoline prices since the beginning of the Russia-Ukraine war,” Jefferies said in a note.
Signs of weakness in consumer, which is a key driver of economic growth, overshadowed hopes for a Ukraine-Russia agreement on a ceasefire after Russian President Vladimir Putin reportedly signaled positive developments in peace talks with Ukraine.
President Joe Biden continued to up the ante on Moscow, calling on lawmakers to revoke Russia’s “most favored nation” status, which could end normal trade with Russia, leading to higher tariffs.
Technology gains a day earlier proved short-lived as the sector resumed its selloff. Big tech as mostly in the red, with Apple (NASDAQ:AAPL) and Meta Platforms (NASDAQ:FB) the biggest decliners.
Meta was also pressured by concerns that user growth could slow even further after Russia restricted access to the social media giant’s Instagram platform and launched a criminal probe in the company.
The investigation was opened after the social media giant changed its policy on hate speech to allow statements such as “death to Russian invaders” on its platforms.
The weakness in the broader market comes just a week ahead of the Federal Reserve’s two-day meeting, which gets underway on March 15.
Ahead of the meeting, Federal Reserve Chairman Jerome Powell has backed a quarter point rate hike and said that the Fed would likely begin talks about how to reduce its balance sheet.
“Chairman Jay Powell will be walking a tightrope, balancing the needs to raise rates and rein in a more systemic rise in inflation with the need to avert a meltdown in credit markets,” said Diane Swonk, chief economist at Grant Thornton.
