US stocks suffer weekly losses and chain to two weeks of straight victories as investors weigh inflation data ahead of Fed meeting

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By Christine Idzelis and Joseph Adinolfi

The S&P 500 posts a weekly loss of 3.4%

U.S. stocks closed on Friday after investors weighed in on new producer price data and a reading on consumer sentiment. All three major stock indices posted weekly declines as investors also priced in inflation concerns ahead of the Federal Reserve’s policy meeting scheduled for Dec. 13-14.

How the stocks traded

What drove the markets

U.S. stocks ended lower on Friday, posting weekly losses as investors weighed headline inflation data and consumer sentiment ahead of the Federal Reserve meeting next week.

All three major benchmarks have posted two consecutive weeks of gains, according to FactSet data. The Dow Jones Industrial Average posted a weekly decline of 2.8%, while the S&P 500 fell 3.4% and the tech-heavy Nasdaq Composite fell 4%.

“Last week’s rally was overdone, and I think we’ve spent this week largely giving it back,” Steve Sosnick, chief strategist at Interactive Brokers, said in a Friday phone interview. “The market has acknowledged that it overshot last week in response” to Fed Chairman Jerome Powell’s November 30 remarks at the Brookings Institution, where he indicated the central bank may slow the pace of its rate hikes of interest at his policy meeting this month, Sosnick said.

Stock trading was choppy on Friday after the U.S. producer price index showed wholesale prices rose 0.3% in November, beating economists polled by the Wall Street Journal had expected. for a gain of 0.2%. The growth rate of producer prices for October and September has also been revised upwards.

“The market is doing its best to ignore it,” Sosnick said. November’s month-over-month rise in wholesale inflation wasn’t so big that it “is going to scare the market off,” he said.

Meanwhile, stocks were encouraged by new data on Friday from the University of Michigan’s consumer confidence indicator, which was stronger than expected this month, according to Sosnick. The reading also showed that consumers’ one-year inflation expectations have fallen from November.

“The correlation between one-year inflation expectations and gas prices is huge,” Sosnick said. “When gas goes down, inflation expectations go down.”

The University of Michigan consumer confidence indicator rose to a preliminary December reading of 59.1 from November’s 56.8. Consumer inflation expectations over the next year fell to 4.6% from 4.9% last month.

Market analysts said investors remained focused on next week’s reading of the November consumer price index on Tuesday to get a more complete picture of inflation in November.

“As for the CPI number next week, we need to see what happens there,” said John Stoltzfus, chief investment strategist at Oppenheimer.

At this point, Interactive Brokers chief strategist Sosnick said he still expects the Fed to cut its next interest rate hike this month to 50 basis points, down from its recent pace of 75 basis points. The Fed, which has raised rates aggressively to combat high inflation in the United States, has a policy meeting scheduled for December 13-14.

As investors await the outcome of that meeting, Kevin Gordon, senior director of investment research at Charles Schwab, said in a phone interview Friday that he would focus on whether Powell “pushes back the easing financial terms because he didn’t make it to the Brookings speech.”

Gordon said he would also be listening to any concerns the Fed Chairman might express about wage pressures stemming from labor market tensions, while looking for clues as to where rate hikes from the central bank could peak.

See: The hottest US jobs market in years is cooling – but it’s still glowing

“Sellers appear to be comfortable with the S&P near 4,000 and the NASDAQ near 11K,” Louis Navellier, chief investment officer of Navellier & Associates, wrote in an emailed note Friday. “Buyers are still hoping for a more dovish stance from the Fed.”

Actions in the spotlight

–Jamie Chisholm contributed to this article.

-Christine Idzelis

(END) Dow Jones Newswire

12-10-22 0910ET

Copyright (c) 2022 Dow Jones & Company, Inc.

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