US stocks had their worst week since March as investors worried that central banks would have to raise interest rates to combat inflation. Bonds rose on speculation that excessive tightening will cause severe economic downturns.
The S&P 500 Index fell 1.4% during the shortened holiday week, while the Nasdaq 100 Index fell 1.3% as investors profited from the year's top technology names. Marvell Technology and GlobalFoundries were among the laggards on Friday, while Microsoft and Nvidia fell.
The second-quarter stock rally, fueled by a rush to buy growth-oriented artificial intelligence stocks, is fraying as more rate hikes loom and investors worry that the full economic impact of aggressive central bank policy has yet to be felt.
Fed Chair Jerome Powell dampened the mood this week by saying the US may need one or two more rate hikes in 2023. Other Fed officials pushed back against investor expectations for a rate cut this year: "I'd be comfortable with the information I have today, staying right where we are and just staying here through the rest of this year and long into next year," Atlanta Fed President Raphael Bostic said at a Friday event.
