The benchmark S&P 500 posted its third straight week of declines

Wall Street’s main indexes ended sharply lower on Friday as Netflix shares plunged after a weak earnings report, capping a brutal week for stocks that saw the S&P 500 and Nasdaq log their biggest weekly percentage drops since the onset of the pandemic in March 2020.

The benchmark S&P 500 posted its third straight week of declines, ending 8.3 percent down from its early January record high.

Losses also deepened for the Nasdaq after the tech-heavy index earlier in the week confirmed it was in a correction, closing down 14.3 percent from its November peak.

Netflix shares tumbled 21.8 percent, weighing on the S&P 500 and the Nasdaq, after the streaming giant forecast weak subscriber growth. Shares of competitor Walt Disney fell 6.9 percent, dragging on the Dow, while Roku also slid 9.1 percent.

In the past week, we’ve seen remarkable top-down shifts in the Nasdaq going into the close, day after day. Is the market finally catching up to reality? Lisa Abramowicz and John Authers sat down to discuss the evolving situation in detail on this week’s Risks & Rewards. Here’s a lightly edited version of their conversation.

Lisa Abramowicz: This week was tumultuous. Looking at the Nasdaq in particular —the selloff, the correction — it’s worth asking: Is this the week that stock markets finally woke up to the reality that bond markets were pricing in that the Federal Reserve was going to raise rates three to four times this year and start quantitative tightening?

Moreover, The Nasdaq Composite’s struggle is largely due to a surge in government bond rates this week. The U.S. 10-year Treasury hit as high as 1.9% on Wednesday as investors focused on the Federal Reserve’s timeline for raising interest rates and broadly tightening monetary policy. However, bond yields retreated on Friday.

Investors will now be turning their attention to the Federal Reserve’s January two-day policy meeting, set to start on Tuesday.