Market Recap Week of 1/02/2023 Through 1/06/2023

The S&P 500 index rose 1.45% last week as investors‘ worries about rate increases eased amid data showing US job and hourly earnings growth slowed in December.

As of Thursday’s market close, the index was below last Friday’s close, but a 2.3% Friday increase on the December jobs data sent the S&P 500 into positive territory for the week.

The market benchmark slid more than 19% in 2022 when climbing inflation prompted the Federal Reserve’s Federal Open Market Committee to raise its benchmark lending rate seven times. Fearing a recession, investors have been hoping the rate increases would slow and eventually lead to rates being reduced, yet the FOMC raised its median rate outlook at its final meeting of 2022.

Earlier last week, minutes released from the December FOMC meeting dashed hopes of a reduction in the Federal Reserve’s key lending rate this year. The minutes said the committee’s participants indicated last month that they expected higher interest rates to remain in place for “some time.” In addition, “no participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023,” the minutes said.

However, investors’ rate worries eased on Friday as the Labor Department’s report of December nonfarm payrolls showed an increase of 223,000, the smallest addition since December 2020, compared with a downwardly revised increase of 256,000 in November. Average hourly earnings growth also slowed. Investors are hoping signs of a slowing labor market may keep Fed officials from raising rates by as much as they otherwise would.

Communication services had the largest percentage increase last week, up 3.7%, followed by a 3.5% increase in materials and a 3.3% rise in financials. Healthcare was the only sector in the red, slipping 0.2%.

Economic data in focus next week will include the consumer price index for December, expected to be released on Thursday. Other reports due next week include inflation expectations from the New York Fed on Monday and the import price index for December on Friday.

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