Market Recap Week of 12/12/2022 Through 12/16/2022

The S&P 500 index fell 2.1% last week amid worries about how high interest rates may climb and whether a recession is in the works.

The S&P 500 is now down 5.6% for December to date and down 19% for the year to date, with just two weeks remaining in the month and year.

Last week’s decline came as the Federal Open Market Committee increased its benchmark lending rate by 50 basis points, as expected, but also raised its median rate outlook, which spooked investors.

While the federal funds rate was moved to a range of 4.25% to 4.5%, the FOMC now expects an increase in the 2023 median funds rate to 5.1%, up from an estimate of 4.6% in September. Its estimated median rates for 2024 and 2025 were increased to 4.1% and 3.1%, respectively, from September estimates of 3.9% and 2.9%.

Weaker-than-expected readings on US retail sales and industrial production only added to investors’ worries.

November US retail sales fell 0.6% in November, worse than the Econoday consensus estimate for a 0.2% decline and marking the largest monthly drop last year. US industrial production unexpectedly fell for the second month in a row amid decreases in mining and manufacturing output. The fall in manufacturing output marked the first monthly drop since June.

All but one of the S&P 500’s sectors declined last week. Consumer discretionary led the slide with a drop of 3.6%, followed by a 2.7% decline in technology, and drops of 2.5% each in financials and communication services. Energy was the lone gainer with a 1.7% increase.

This week’s economic calendar will be heavy on housing and inflation data.

Early in the week, investors will receive the National Association of Home Builders index for December as well as building permits, housing starts and existing home sales for November. Later in the week, new home sales for November will be reported on Friday, though the personal consumption expenditures — or PCE — price index, a key inflation reading, is likely to receive the most attention on Friday.

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