The stock market was fairly flat this week, especially in the second half, as investors digested a host of headlines, most notably the Fed’s latest rate-hike decision. The S&P 500 registered three losses and a new record high this week, eventually settling with a slim gain of 0.1%. The Dow (+0.5%) and the Nasdaq (-0.9%) settled on opposite sides of the S&P 500.
After plunging nearly 3.0% last Friday, the top-weighted technology sector registered another notable decline in the first session of the week, losing 0.8%, as mega-cap names like Apple, Microsoft, Alphabet, and Facebook weighed. Amazon also under-performed, but the consumer discretionary sector, like the S&P 500, was able to escape with just a slim loss.
The tide turned in the bulls’ favor on Tuesday as the aforementioned companies bounced back from their two-day declines. The technology and consumer discretionary sectors led the advance, pushing both the benchmark index and the Dow to new record highs. However, the S&P 500’s gain was capped at 0.5% as investors approached Wednesday’s Fed rate decision with caution.
As expected, the Fed voted to raise the fed funds target range by 25 basis points to 1.00% – 1.25% in the midweek session. In addition, the Fed laid out a specific plan for how it will start to normalize its balance sheet going forward.
Equity indices opened solidly lower on Thursday as the market continued to debate whether the Fed might be tightening policy too much and/or too fast. In addition, sentiment was dampened by a Washington Post report that claimed Special Counsel Mueller’s investigation of Russia’s interference in the U.S. election is broadening in scope to examine whether President Trump tried to obstruct justice.
The technology and consumer discretionary sectors showed relative weakness, yet again, on Thursday morning. However, the two groups were able to reclaim a good portion of their losses as the day went on. A positive performance from the industrial sector helped keep the S&P 500’s loss (-0.2%) in check.
On Friday, Amazon dominated the headlines after announcing that it plans to acquire Whole Foods Market for $42 per share in cash. Big-box retailers like Wal-Mart, Costco, and Target plunged on the news, sending the consumer staples sector to the bottom of the day’s leader-board. However, the S&P 500 still managed to eke out a slim victory.
It’s also worth pointing out that WTI crude settled the week with a loss of 2.4% following a bearish inventory report on Wednesday, which showed a smaller than expected draw of 1.7 million barrels in crude stocks and a build of 2.1 million barrels in gasoline inventories for the week ended May 9. The tumble left the commodity at its worst level since early November.
Despite the Fed’s call for a third rate hike in 2017, the fed funds futures market points to the March 2018 FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 50.8%, down from last week’s 60.7%. The implied probability of a December rate hike sits at 43.4%, down from last week’s 51.7%.
Source: Briefing Investor