Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 26, 2022.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 26, 2022. Reuters / BRENDAN MCDERMID

All three Wall Street benchmarks were more than 2% lower on Friday, stumbling towards the end of a week which has seen whipsaw moves caused by surprise earnings news and increased certainty around aggressive near-term interest rate rises.

The latest earnings forecasts to jolt investors came from healthcare, with HCA Healthcare and Intuitive Surgical Inc the worst performers on the S&P 500 in early-afternoon trading.

HCA slumped 19% after reporting a downbeat profit view, while other hospital operators felt the contagion: Tenet Healthcare, Community Health Systems and Universal Health Services fell between 12.9% and 18.8%.

Surgical robot maker Intuitive Surgical dropped 13.5% after it warned of weaker demand from hospitals due to tighter finances.

All 11 major S&P 500 sectors were lower, although healthcare was not the industry suffering the most.

That misfortune fell to materials, which was weighed by Nucor Corp - down 8.3% after hitting a record high after posting earnings on Thursday - and Freeport-McMoRan Inc, which slipped 7% as investors fretted over how interest rate hikes would impact copper miners.

Concerns about risks from interest rate hikes continued to reverberate after Federal Reserve Chair Jerome Powell's hawkish pivot on Thursday, where he backed moving more quickly to combat inflation and said a 50-basis-point increase would be "on the table" when the Fed meets in May.

The idea of "front-end loading" the U.S. central bank's retreat from super-easy monetary policy, which Powell articulated support for on Thursday, has also forced traders to re-evaluate how aggressive subsequent rate rises would be.

"The rate environment is not going away. COVID is not going to disappear overnight. Earnings are going to be affected by these issues," said Andre Bakhos, managing director at New Vines Capital LLC in New Jersey.

"So we have a cauldron brewing with ingredients that make for a dangerous combination."

The CBOE Volatility index, also known as Wall Street's fear gauge, hit a five-week high.

The prospect of a more hawkish Fed has led to a rocky start to the year for equities, in particular tech and growth shares whose valuations are more vulnerable to rising bond yields.

Earnings are due next week for the four biggest U.S. companies by market capitalization: Apple, Microsoft, Amazon and Google parent Alphabet.

The quartet, as well as Meta Platforms Inc, which also has results on deck for next week, suffered a sell-off on Friday, dropping between 1.7% and 4.4%.

Investors are worried after streaming giant Netflix Inc's dismal earnings earlier this week sent shockwaves through big tech and stay-at-home darlings which benefited from pandemic factors such as lockdown measures.

By 2:16 p.m. ET (1816 GMT), the Dow Jones Industrial Average fell 741.66 points, or 2.13%, to 34,051.1, the S&P 500 lost 95.67 points, or 2.18%, to 4,297.99 and the Nasdaq Composite dropped 276.75 points, or 2.1%, to 12,897.90.

All the three main indexes were on course to end the week lower.

Adding to inflation worries, U.S. business activity slowed in April as soaring costs for raw materials, fuel and labor pushed input prices to a record high, a survey by S&P Global showed.

Among other companies that reported results, Gap Inc tumbled 18.9% after the apparel company cut its forecast for quarterly sales, blaming execution challenges at its Old Navy brand and "macro-economic dynamics".

Verizon Communications Inc fell 5.9% after disappointing full-year earnings forecast.

However, Schlumberger NV gained 3.8% after reporting a higher first-quarter profit, as rising oil prices due to Russia's invasion of Ukraine boosted the demand for oilfield services and equipments.