By Shubham Batra and Shashwat Chauhan
(Reuters) -Wall Street’s main indexes dropped on Friday as U.S. Treasury yields hovered near multi-year highs following hawkish remarks by Federal Reserve Chair Jerome Powell, while the Middle East conflict kept investors jittery.
Israel levelled a northern Gaza district on Friday and hit an Orthodox Christian church where people had been sheltering, as it made clear that a command to invade Gaza was expected soon.
Speaking at the Economic Club of New York on Thursday, Powell said the U.S. economy’s strength and continued tight labor markets could require tougher borrowing conditions to control inflation.
“Obviously with yields moving higher, you expect the equity market to pull back a little bit. Better-than-expected economic data, inflation not coming down as anticipated and weak demand at auctions contributed to higher yields,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments.
Atlanta Fed President Raphael Bostic told CNBC that while inflation remained too high, it was easing amid mounting evidence of an economic slowdown, and that could open the door to a softer monetary policy late next year.
Philadelphia Fed President Patrick Harker said the central bank could not allow inflation to accelerate again but reiterated that it was time to hold rates steady.
Fed officials will enter a media blackout from Saturday ahead of their meeting on Nov. 1.
The , which briefly crossed 5% on Thursday for the first time since July 2007, was last at 4.9073%.
Traders see a near 98% chance the Fed will keep benchmark rates unchanged in November, while their bets for a pause in December stood at around 74%, according to CME’s FedWatch Tool.
Shares of mid-sized U.S. banks fell after a string of earnings reports heightened investor concerns that the boost to lenders from the Federal Reserve’s interest rate hikes was tapering off.
Regions Financial (NYSE:) slid 11.4% to its lowest since March 2020.
Credit card giant American Express (NYSE:) beat third-quarter profit estimates, but its shares fell more than 4%.
At 11:46 a.m. ET, the was down 176.06 points, or 0.53%, at 33,238.11, the was down 41.99 points, or 0.98%, at 4,236.01, and the was down 182.59 points, or 1.38%, at 13,003.59.
Accounting for Friday’s moves, all three indexes were on course for weekly declines.
Eight of the 11 S&P 500 sub-sectors were in the red, with consumer discretionary, energy and information technology leading declines amongst the major S&P 500 sectors.
Third-quarter earnings for the S&P 500 companies are expected to increase 1.1% year-on-year, compared with a 1.6% rise estimated on Thursday, as per LSEG data.
SolarEdge (NASDAQ:) slumped 31.3% after it warned of significantly lower revenue in the fourth quarter.
Cryptocurrency and blockchain-related firms Coinbase (NASDAQ:) Global, Riot Platforms and Marathon Digital (NASDAQ:) rose between 2.3% and 2.7%, tracking higher bitcoin prices.
Declining issues outnumbered advancers by a 2.17-to-1 ratio on the NYSE and by a 2.07-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and 32 new lows, while the Nasdaq recorded three new highs and 320 new lows.
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