U.S. stocks suffered its worst monthly rout since March 2020 after markets were repeatedly pummeled by the Federal Reserve’s resolve to keep raising interest rates until inflation is under control. 

The S&P 500 closed a volatile session lower. The index suffered its third straight quarter of losses for the first time since 2009. U.S. Treasuries dropped Friday after a late selloff into the month end, with the benchmark 10-year yield around 3.80 per cent. 

Risk assets have been in a tailspin since the central bank delivered a third jumbo hike last week and officials repeatedly warned of more pain to come. U.K. markets added to the stress this week, after the government unveiled sweeping tax cuts that threatened to add to inflationary pressures, and the Bank of England attempted to manage the mayhem that ensued. 

Fed Vice Chair Lael Brainard briefly assuaged concerns on Friday after she acknowledged the need to monitor the impact rising borrowing costs could have on global-market stability. But markets continued to be on the edge as investors contended with continued strength in personal consumption expenditure, one of the Fed’s preferred inflation gauges. 

Investors are now awaiting jobs data next week for further clues about the Fed’s rate-hike trajectory. Upcoming inflation and GDP readings will also provide details on whether price pressures are easing meaningfully. All eyes will be on the earnings season, which starts next month, for insight into how companies are managing through headwinds that include a strong dollar, rising expenses and slowing demand. Fears of global recession are still mounting as the threat of higher rates saps growth.

“Investors are eager and nervous to realize how dovish or hawkish global central banks become as tighter financial conditions and higher interest rates weaken economic performance and threaten financial stability,” said José Torres, senior economist at Interactive Brokers. 

Geopolitical tensions also continued to simmer as Vladimir Putin vowed his annexation of four occupied regions in Ukraine is irreversible and President Joe Biden declared that a massive leak from the Nord Stream gas pipeline system in the Baltic Sea was an intentional act.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.5 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 1.7 per cent
• The Dow Jones Industrial Average fell 1.7 per cent
• The MSCI World index fell 1.4 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.2 per cent
• The euro fell 0.2 per cent to US$0.9800
• The British pound rose 0.4 per cent to US$1.1166
• The Japanese yen fell 0.2 per cent to 144.73 per dollar

Cryptocurrencies

• Bitcoin was little changed at US$19,495.92
• Ether was little changed at US$1,338.54

Bonds

• The yield on 10-year Treasuries was little changed at 3.79 per cent
• Germany’s 10-year yield declined seven basis points to 2.11 per cent
• Britain’s 10-year yield declined five basis points to 4.09 per cent

Commodities

• West Texas Intermediate crude fell 1.8 per cent to US$79.75 a barrel
• Gold futures were little changed