U.S. stocks declined during the week, although a rally on Friday helped major indexes recover some of their lost ground. Losses were broad-based, though smaller-cap indexes generally fared worst. The Fed’s rate cut announcement on Wednesday (25bps) was largely expected. However, sentiment turned negative as investors digested hawkish forecasts and commentary from Fed officials regarding the path forward for interest rates. The hawkish tone helped drive the S&P 500 Index lower by nearly 3% for the day, its second-worst day of the year. Political uncertainty in the form of a looming government shutdown also seemed to rattle investor confidence. In economic news, the U.S. Real GDP grew 3.1% in Q3, outpacing a previous estimate of 2.8%, partially owing to increases in consumer spending. Retail sales rose 0.7% in November, up from 0.5% in October. Initial jobless claims of 220,000 were down from the prior week. The core PCE index—the Fed’s preferred measure of inflation—rose by 2.8% year-over-year in November, slightly lower than consensus expectations. This helped push stocks higher on Friday to finish the week above their worst levels. US Treasury yields rose on the week. In Europe, the STOXX Europe 600 Index ended 2.76% lower—its biggest weekly loss in more than three months. In Japan, the Nikkei 225 Index lost 2.0%. On the back of Wednesday’s hawkish Fed rate cut, the dollar surged while gold and cryptos tumbled.
Have a great weekend and a Merry Christmas!