Wall St falls, reversing early gains as rebound loses steam

© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., August 15, 2023. REUTERS/Brendan McDermid

By Stephen Culp

NEW YORK (Reuters) - Wall Street turned lower on Friday, reversing an early rebound from Thursday's steep sell-off, and benchmark Treasury yields backed down off 16-year highs as investors neared the end of a tumultuous week.

The S&P 500 and the Dow in negative territory, with Tesla Inc (NASDAQ:TSLA) and Microsoft Corp (NASDAQ:MSFT) weighing heaviest. The Nasdaq was essentially unchanged.

All three indexes are on track to notch weekly losses, with the S&P 500 and the Nasdaq headed for their largest Friday-to-Friday percentage decline since March.

On Thursday, the S&P 500 dipped below its 100-day moving average - a key support level - for the first time since March, Its failure to break above that level suggests the index is still under downward pressure.

"Investors are testing the market, gauging how much have we lost whether it’s time to step back in," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

Benchmark U.S. Treasury yields retreated from 16-year highs as investors turned their focus from hawkish Fed guidance to key economic data waiting in the wings.

Investors were still digesting the Fed's decision to let its key interest rate stand, but updated its quarterly Summary Economic Projections to suggest restrictive monetary policy will remain in place longer than previously anticipated.

Remarks from Fed Governor Michelle Bowman supported the FOMC hawks, suggesting the Fed funds target rate should be raised further and held "at a restrictive level for some time" to bring inflation down to the central bank's 2% target.

"There are a lot of factors working against a soft landing and that’s something the Fed needs to be reminded of because pushing rates higher could push us into recession," Pavlik added.

At 2:21PM ET, the Dow Jones Industrial Average fell 64.04 points, or 0.19%, to 34,006.38, the S&P 500 lost 4.22 points, or 0.10%, to 4,325.78 and the Nasdaq Composite added 2.46 points, or 0.02%, to 13,226.45.

Among the 11 major sectors of the S&P 500, consumer discretionary was down the most. Tech shares had the largest percentage gains.

Ford Motor (NYSE:F) Co gained 2.3% after the striking United Auto Workers union reported progress in talks with the automaker.

Activision Blizzard (NASDAQ:ATVI) added 1.7% in the wake Britain's antitrust regulator's statement that Microsoft Corp's restructured $69 billion acquisition of the company by "opens the door" to the biggest-ever gaming deal being cleared.

U.S.-listed shares of Chinese firms including PDD Holdings, JD.com, Li Auto and Baidu (NASDAQ:BIDU) rose between 2% and 4% on signs of an economic a rebound, while Alibaba (NYSE:BABA) jumped 4.7% after Bloomberg reported that report the company's logistics arm Cainiao was planning to file for a Hong Kong IPO as soon as next week.

Advancing issues outnumbered declining ones on the NYSE by a 1.24-to-1 ratio; on Nasdaq, a 1.09-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 34 new lows; the Nasdaq Composite recorded 24 new highs and 267 new lows.