Powell comments fuel 1,000-point market rout Friday as stocks slide for a second week

The Dow Jones Industrial Average dropped 1,008.38 points, or 3.03%, to 32,283.40, after accelerating losses into the close. The S&P 500 fell 3.37% to 4,057.66, and the Nasdaq Composite slid 3.94% to 12,141.71.

The major averages declined for a second week. The Dow slid 4.2%. The S&P 500 and Nasdaq Composite lost roughly 4% and 4.4%, respectively.

— Sarah Min

The S&P 500’s drop of more than 3% on Friday has brought the index to roughly 4,067.

If that holds, it will be the S&P 500’s lowest close since 4,023.61 on July 27.

The market’s struggles over the past 10 days erased some solid rallies earlier in August. The index closed at 4,305.2 on Aug. 16 but has lost more than 5% since then.

—Jesse Pound

In an ugly day for the markets overall, gold mining stocks are taking it on the chin.

The VanEck Gold Miners ETF has fallen more than 5%, underperforming the major market averages. The fund has now fallen more than 38% from its recent peak in early April.

Several individual mining stocks were down more than 7%, including Coeur Mining and IAMGOLD.

Gold settled down 1.22% for the day, notching a negative week for the precious metal.

—Jesse Pound, Gina Francolla

Energy is the one bright spot in the market this week, with the S&P 500 energy sector rallying more than 5% so far this week.

The sector, down on Friday amid the market selloff, is the only positive one for the week. Higher oil prices helped propel the stocks higher, with West Texas Intermediate crude up 1.7% this week.

The biggest winner is APA Corp, up 10.9% since Monday.

CNBC Pro subscribers can read the full story here.

— Michelle Fox

Here are three stocks making the biggest moves Friday:

• Affirm — Shares plunged more than 20% after the consumer lending company reported a larger-than-expected quarterly loss, and issued a disappointing outlook.
• Farfetch — The online luxury retailer stock surged nearly 30% after the company topped earnings expectations.
• Electronic Arts — Shares gained roughly 5% following a Swedish news report that Amazon is expected to make an offer to buy the company. However, sources have told CNBC’s David Faber that there is no such deal.

Check out more of the day’s biggest movers here.

— Sarah Min, Tanaya Macheel

During afternoon trading, information technology, consumer discretionary and communication services were the biggest laggards in the S&P 500. The sectors were down 3.4%, 3.3% and 3.3%, respectively, as investors fretted over the likelihood of higher interest rates.

Meanwhile, energy and utilities were the best-performing sectors in the broader market index. The sectors were down 0.6% and 1.1% each.

— Sarah Min

Federal Reserve Chairman Jerome Powell’s Friday speech was more hawkish than anticipated, weighing on stocks, according to Chris Senyek of Wolfe Research.

“A more hawkish tone was largely expected coming into his speech this morning,” Senyek wrote in a Friday note. That said, the market is interpreting his tone as even more hawkish than those expectations.

After Powell’s remarks, both yields on the U.S. two-year treasury and the March 2023 fed funds future were up by roughly 0.5%, and stock slumped. Going forward, it’s likely that stocks will continue to trade down according to Senyek.

“This speech is likely to keep downward pressure on equity markets, with the “Growth” trade and “long-duration” subsectors & stocks getting hit hardest… think a reversal of the trade since mid-June,” he wrote.

Senyek also reiterated his bearish stance on stocks. Going forward, he sees inflation readings and other economic data as the largest market drivers through the end of the year.

“We continue to believe that (1) core inflation is going to be a thorn in the Fed’s side and prove to be very persistent, and (2) headwinds from Fed tightening have only just started to show up in economic readings and a demand-driven recession is going to hit at the end of this year or beginning of next year,” he said.

—Carmen Reinicke

Roughly six stocks at the New York Stock Exchange fell for every advancer Friday, as the market sold off following Fed Chair Jerome Powell’s highly anticipated speech. At the S&P 500 level just 15 names traded higher.

—Fred Imbert

With a 1% excise tax on share buybacks set to take effect next year, companies may speed up buybacks or start returning more money to investors through dividends.

While the 1% levy shouldn’t have a big impact on companies, taxes often influence corporate payout decisions, UBS analyst Keith Parker wrote in a note Wednesday.

According to an estimate by the Tax Policy Center, the tax could boost corporate dividend payouts by 1.5%.

To be sure, there are several things companies have to take into consideration when deciding whether to move up buybacks or push out a dividend, including the tax treatment that shareholders will face.

CNBC Pro subscribers can read the full story here.

—Michelle Fox, Darla Mercado

Markets have priced in a recession and are steering toward a soft landing, according to Fundstrat’s Tom Lee.

“I think we’ve seen a lot of evidence this is turning out to be a soft landing,” Lee said Friday on CNBC’s “Halftime Report.”

The investor pointed to softness in durable goods, such as falling used car prices this year, as disinflationary categories that are benefiting consumers. “That’s not a recession, that’s an adjustment of demand,” Lee said.

“I think that there are again, like you said, a lot of mixed currents, but the markets priced in a recession. I think a soft landing to me still seems more probable,” he said.

— Sarah Min

The communications services sector, which includes Big Tech stocks, drove the market sell-off that ensued following Federal Reserve Chair Jerome Powell’s speech.

The S&P 500’s communications services sector slumped by 2.5% around 10:42 a.m. ET. Tech giants in the group helmed the decline, with shares of Alphabet sliding nearly 4%. Meta lost 2.5% and Netflix fell 2%. Twitter lost 1.5%.

Tech names are especially sensitive to rising interest rates, which hurt the value of the stocks’ future earnings.

Indeed, Powell gave a brief hawkish speech at the Fed’s annual economic symposium at Jackson Hole earlier this morning. He signaled that policymakers would adopt a restrictive stance “for some time,” and he warned against loosening policy too soon.

–Darla Mercado

“He hit the right notes,” said Wells Fargo’s Michael Schumacher, noting that the chairman’s speech has to be the shortest ever from a chairman at Jackson Hole.

“Eight minutes. The market has been sitting there doing nothing all week, just for eight minutes,” he said.

— Sarah Min, Patti Domm

A better-than-expected reading for the University of Michigan consumer sentiment index may be helping to offset Jerome Powell’s hawkish speech at Jackson Hole.

The final reading for the August consumer sentiment index came in at 58.2. That was up from 51.5 in July and above the 55.3 expected by economists, according to Dow Jones.

Year-ahead inflation expectations fell to 4.8% from 5.2% in July. That marks the lowest reading in eight months.

— Jesse Pound

Fed Chairman Jerome Powell reiterated that the central bank will continue raising rates to subdue inflationary pressures. He also warned, however, there may be “some pain” ahead as these measures take hold.

 “Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy,” Powell said in a speech at a Jackson Hole, Wyoming symposium.

—Fred Imbert, Jeff Cox

Treasury yields were mixed, ahead of Federal Reserve Chairman Jerome Powell’s Jackson Hole speech at 10 a.m. ET.

The 10-year yield was higher at 3.05%. The 2-year yield, which is most driven by Fed policy, was slightly lower at 2.38%. Yields move opposite price. Trading was light.

“It’s sleeping, just waiting for the big event,” said Wells Fargo’s Michael Schumacher. “There’s no motivation right now. You could be dead wrong by a lot. Most people think it will be a non-event, but why take the risk.”

The chairman is expected to emphasize that the Fed will be relentless in using its policies to drive down inflation, though the futures market has been pricing in a quarter point rate cut for the second half of next year. He is also expected to stress that once the Fed raises interest rates to its terminal rate, or end rate, it will likely hold them there.

The fed funds futures market is pricing in some significant hikes, including the 64 basis points of a hike in September, notes Schumacher. That pricing reflects the current market debate on whether the Fed will raise rates by another three-quarters points or slows to a half point hike at its Sept. 20 and 21 meeting.

“Right now, the market is pricing 3.62% for the end of this year, and the peak to be about 3.78% in March,” said Schumacher. The Fed has currently targeted the fed funds rate in a range of 2.25% to 2.50%.

— Patti Domm

As stocks climbed off their mid-June lows, the market value of cryptocurrencies rose almost 40%, thanks largely to the 72% jump in ether. That momentum has cooled off now, however, as investors have been reassessing the sustainability of the relief rally in risk assets broadly and wait to see what Fed Chairman Powell says in Jackson Hole.

“Our view is that risks related to a mild recession are likely discounted,” the firm said in a note Friday. “But the potential for a hard recession (our macro colleagues expect S&P EPS to fall in 2023 and question the excitement around 8.5% inflation) may result in another risk asset correction including crypto/digital assets.”

— Tanaya Macheel

The S&P 500 opened little changed ahead of Federal Reserve Jerome Powell’s Jackson Hole speech.

The broader market index dipped 0.03%, and the Nasdaq Composite slid 0.08%, shortly after the bell. The Dow Jones Industrial Average advanced 70 points, or 0.21%.

— Sarah Min

Personal consumption expenditures, one of the Federal Reserve’s favorite inflation indicators, slipped on a monthly basis in July and was up less on the year than anticipated.

The inflation measure fell 0.1% in July and was up 6.3% on the year, the Bureau of Economic Analysis reported Friday. It was expected that the PCE index would be unchanged on a monthly basis in July and up 6.4% on the year.

The report also showed that personal income ticked up less than expected, up 0.2% month over month versus an estimated 0.6%. It’s one of the reports the Fed will be watching ahead of its September meeting, when it is likely to raise interest rates again.

—Carmen Reinicke

Markets are getting “ahead of themselves” pricing in a soft landing, according to UBS.

“Recent US economic data has been encouraging, improving the likelihood of the Fed achieving a soft landing. But we think markets may have gotten ahead of themselves in pricing in this scenario,” UBS’ Global Wealth Management Chief Investment Officer Mark Haefele wrote in a Friday note.

Investors should prepare for a volatile period ahead as markets get more information on whether the Federal Reserve can or can’t engineer a soft landing. In its base case, UBS believes that stocks will reach June 2023 at a similar level to current prices, according to the note.

“If the Fed’s incremental rate hikes are effective in bringing down inflation, then we could see upside for markets over the next year. But if the Fed, or the market, misjudge the direction and drivers of inflation, outcomes for investors would likely be much worse,” read the note.

— Sarah Min

Shares of Electronic Arts pared gains Friday after CNBC’s David Faber poured cold water on a report that said Amazon would propose to buy the video game company. The stock was last up 5% after earlier rallying more than 13%.

—Fred Imbert

Tech investor Paul Meeks is holding on to cash in his tech portfolios.

The portfolio manager at Independent Solutions Wealth Management said he has built a cash hoard of more than 20% in some of his portfolios that he is slowly starting to deploy, he said in a Friday appearance on CNBC’s “Squawk Box.”

“I do have, almost ever since last Thanksgiving, a cash hoard, and I call it a hoard because it is fairly large,” Meeks said. “I’m starting to put some money back in and I would like to focus on those confidence names.”

“At the end of the day, I have cash in portfolios that some of them exceeds 20%,” he said.

Meeks said he is waiting for tech valuations to pull back to their June lows before he would pile back into the sector. Until then, he has confidence in some names such as cybersecurity company Palo Alto Networks and cloud computing firm Snowflake.

— Sarah Min

Gap stock jumped about 6% in Friday premarket trading following calendar second-quarter earnings results that topped expectations.

The retailer reported earnings of 18 cents per share on revenue of $3.86 billion. Analysts surveyed by Refinitiv were expecting a loss of 5 cents per share on revenue of $3.82 billion.

Still, the struggling retailer withdrew its financial outlook for the year and its Old Navy business struggled with its inventory mix.

Shares of Affirm tumbled in Friday premarket trading after the consumer lending company issued weak full-year revenue guidance.

Still, in its most recent quarter, Affirm reported revenue expectations of $364 million, surpassing expectations of $355 million, according to consensus expectations from Refinitiv.

Analysts are betting on Ulta Beauty, noting that the stock has more upside as the beauty company shows resilience despite the current macro environment.

William Blair’s Dylan Carden reinstated coverage of the stock with an outperform rating, noting that: “We believe that Ulta is well positioned to continue to take meaningful market share over time and that the cosmetics category is poised for a continued rebound as the pandemic subsides and greater newness is introduced.”

CNBC Pro subscribers can read more here.

—Fred Imbert, Sam Subin

New developments in the lawsuit against drugmakers involved in once popular heartburn medication Zantac could boost shares of Sanofi and GSK by more than 40% each, Citi says.

Both drugmakers have sold off heavily this month as the first lawsuit began in an ongoing battle alleging carcinogens in the heartburn drug.

CNBC Pro subscribers can read the full story here.

— Samantha Subin

European markets were mixed on Friday as global attention turns to U.S. Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole economic symposium.

The pan-European Stoxx 600 was fractionally lower by mid-morning, having given back gains of 0.4% at the open. Basic resources gained 0.8% while media stocks fell 1.5%.

– Elliot Smith

A sharp sell-off in chip stocks in this year has offered investors an opportunity to buy the dip. But fund manager Paul Meeks is staying away from one particular stock. He revealed why and named 2 chip stocks he would rather buy.

Pro subscribers can read the story here.

— Zavier Ong

Inflation concerns are back in force amid a pullback in stocks. Fund manager Jordan Cvetanovski named 2 stocks he’s putting his money on to navigate inflation that’s “here to stay.”

Pro subscribers can read the story here.

— Zavier Ong

Shares of Bed Bath & Beyond rose as much as about 5% after hours Thursday after the home goods retailer said it will share its turnaround strategy with investors on Wednesday. The company has been struggling with slowing sales and dwindling cash ahead of the holiday shopping season. It’s reportedly in talks with a lender to shore up its finances and give confidence to suppliers that help stock its shelves.

— Melissa Repko and Tanaya Macheel

The buy-now-pay-later darling’s shares slid about 14% after hours after it reported a bigger-than-expected quarterly loss of 65 cents per share, according to Refinitiv. It also issued weak revenue guidance for its fiscal first quarter and full year.

CEO Max Levchin also said growth of online commerce is falling back to pre-Covid levels.

— Tanaya Macheel

Leuthold Group’s Jim Paulsen warned investors not to let their anxieties get the best of them as the markets are likely to “regain their footing and move on” once the symposium in Jackson Hole is behind them.

“There has been tough talk on inflation all week, and there will be more tomorrow. But what will be said that has not already been said — or at least considered and discounted by the financial markets?” Paulsen said in a note Thursday. “Is the Fed going to raise rates again at its September meeting? Yes. Will that be shocking? No.”

“Most likely, the inflation rate has already peaked and will return to 4% or less in the not-to-distant future,” he added. “More importantly, regardless of what the Fed does this fall, inflation is apt to soon resume its secular disinflationary character exhibited over the last several decades.”

— Tanaya Macheel

On Thursday the S&P 500 closed above its 20-day moving average of around 4,186, which is a good gauge of short-term trends, according to BTIG’s chief market technician, Jonathan Krinsky. However, the market is still in for more turbulence, he says.

“We think the June lows are probably in but the caveat there is that it’s not going to be smooth sailing. A lot of people assume once the lows are in then it’s just up and to the right, and that’s really not typical of markets,” he said on CNBC’s “Closing Bell: Overtime” Thursday.

Earlier this month the broad market index closed above 4,231 – a more-than-50% retracement of its 2022 selloff and the magic number Krinsky previously said would mean this is a new bull market and not just a bear bounce.

— Tanaya Macheel