U.S. stocks ended slightly lower on Friday, led by weaker megacap shares following their recent rally, as data showed U.S. consumer sentiment dropped to a six-month low.
The Dow Jones Industrial Average fell 8.89 points, or 0.03%, to 33,300.62; the S&P 500 lost 6.54 points, or 0.16%, to 4,124.08; and the Nasdaq Composite dropped 43.76 points, or 0.35%, to 12,284.74.
S&P 500 utilities and consumer staples were the leading sectors, both rising 0.4%.
For the week, the Dow was down 1.1%, the S&P 500 fell 0.3% and the Nasdaq rose 0.4%.
The Congressional Budget Office said on Friday the U.S. faces a “significant risk” of defaulting on payment obligations within the first two weeks of June without a debt ceiling increase.
What is driving the market?
The market was weighed down by concerns about the economy and inflation. Consumer sentiment fell to 59.1 in May, its lowest level since November, as a standoff to raise the federal government’s borrowing cap added to worries about the economic outlook.
Investors are concerned that the Fed’s aggressive interest rate hikes could push the economy into recession. Fed Governor Michelle Bowman said Friday the Fed will probably need to raise rates further if inflation stays high.
What are the implications for investors?
Investors should be prepared for continued volatility in the market. The Fed is expected to raise interest rates several more times this year, and that could put pressure on stocks. Investors should also be mindful of the risks to the economy, including the possibility of a recession.
What are the alternatives?
Investors who are looking for ways to protect their portfolios from the volatility in the market could consider investing in defensive stocks, such as utilities and consumer staples. These stocks are generally less volatile than other sectors, and they can provide a cushion during times of market turmoil.
Investors could also consider investing in international stocks. International stocks are often less correlated to the U.S. market, so they can provide diversification and reduce risk.
What is the future outlook for the market?
The market is likely to remain volatile in the near term. However, investors should be optimistic about the long-term outlook for the market. The U.S. economy is still growing, and corporate earnings are expected to continue to grow. In addition, the Fed is likely to be successful in bringing inflation under control.
Overall, the market is likely to continue to be volatile in the near term, but investors should be optimistic about the long-term outlook.