The S&P 500 index fell 3.4% last week as investors worried that a recent round of better-than-expected economic data might prompt the Federal Reserve to keep its key rate higher for longer.
This marks the S&P 500’s first weekly decline since the week ended Nov. 18, although it has spent much of 2022 in the red; it is down 17% for the year to date, with only three weeks remaining.
The weekly decline came as a number of economic reports over the last week came in stronger than expected. A November reading on the services sector from the Institute for Supply Management as well as a December reading on consumer sentiment from the University of Michigan both came in above expectations last week. They followed a stronger-than-expected November employment data released last Friday.
Investors are fearful that if economic data continue to come in above expectations, the Fed’s Federal Open Market Committee — which has a two-day meeting next week — may keep its benchmark lending rate higher for longer as it continues trying to tamp down inflation.
Still, not all data have come in stronger than expected. Weekly jobless claims released Thursday showed US jobless claims increased by 4,000 to 230,000 in the week ended Dec. 3, and continuing claims advanced to 1.67 million from 1.61 million, marking the highest level of continuing claims since February.
On Friday, a larger-than-expected rise in US producer prices in November only added to investors’ worries about rates and inflation. The core Producer Price Index for November rose by 0.4%, double the 0.2% rise that was expected and quadruple the previous month’s 0.1% increase.
All of the S&P 500’s sectors fell last week. Energy had the largest percentage drop, down 8.4%, followed by communication services, which slid 5.4%, and consumer discretionary, which fell 4.5%. Other decliners included financials, down 3.9%; and technology and materials, which slipped 3.3% each. The smallest decline came from utilities, which edged down 0.3%.
This week, all eyes will be on the FOMC’s two-day meeting, which concludes on Wednesday. Other focal points on the economic calendar include the release of the November consumer price index on Tuesday, November retail sales on Thursday, and December readings on the manufacturing and services sectors from Standard & Poor’s on Friday.
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