It was the benchmark index’s worst weekly performance of the new year so far, as sentiment was dampened by lingering concerns surrounding the Federal Reserve.
Last Friday’s explosive jobs report weighed on the mood at the beginning of the week, as market participants fretted that the surge in job openings would keep the pressure on the Fed to continue hiking rates.
Fed chair Jerome Powell on Tuesday calmed markets somewhat after making comments that were less hawkish than expected at an event in Washington, D.C. The central bank chief also did not seem too concerned by the hotter-than-expected jobs report. He reiterated that a “disinflationary process” had begun but that there was still more work to do and more rate hikes ahead.
However, Powell’s comments were followed by warnings from a host of Fed speakers on Thursday that more rate hikes would be needed to combat inflation, exacerbating fears that policymakers might need to stay hawkish longer than previously anticipated.
The week also saw the earnings season pick up steam. Major companies that reported their results included entertainment giant Disney (DIS), ride-sharing firm Uber (UBER), beverage maker Pepsi (PEP), payments processor PayPal (PYPL) and videogame publishers Activision Blizzard (ATVI) and Take-Two (TTWO).
“We are more than halfway through the Q4 reporting season in the US, with 63% of companies having reported,” JPMorgan’s Bram Kaplan said in a note.
“Earnings are contracting on a y/y basis this quarter, for the first time since 2020 … Energy, Industrials, and Discretionary are reporting strong growth, while Materials, Financials, Tech, and Communication Services are down double digits on EPS growth,” Kaplan said.
Turning to economic data, the calendar for the week was relatively light. Of note were weekly jobless claims numbers, which showed that the number of Americans filing for claims rose to 196K compared to the 192K anticipated. The data pointed towards continued resilience in the labor market.
Investors also digested a lesser-than-expected swelling in trade in goods and services deficit, an expected rise in wholesale inventories in December 2022, and the University of Michigan’s preliminary measure of February consumer sentiment.
All 11 S&P 500 (SP500) sectors – with the exception of Energy – ended the week in the red, with Communication Services and Consumer Discretionary falling the most. See below a breakdown of the weekly performance of the sectors as well as their accompanying SPDR Select Sector ETFs from Feb. 3 close to Feb. 10 close:
#1: Energy +5.03%, and the Energy Select Sector SPDR ETF (XLE) +4.94%.
#2: Health Care -0.20%, and the Health Care Select Sector SPDR ETF (XLV) -0.15%.
#3: Utilities -0.38%, and the Utilities Select Sector SPDR ETF (XLU) -0.29%.
#4: Financials -0.38%, and the Financial Select Sector SPDR ETF (XLF) -0.27%.
#5: Consumer Staples -0.54%, and the Consumer Staples Select Sector SPDR ETF (XLP) -0.59%.
#6: Industrials -0.70%, and the Industrial Select Sector SPDR ETF (XLI) -0.69%.
#7: Information Technology -1.10%, and the Technology Select Sector SPDR ETF (XLK) -0.98%.
#8: Materials -1.66%, and the Materials Select Sector SPDR ETF (XLB) -1.65%.
#9: Real Estate -2.01%, and the Real Estate Select Sector SPDR ETF (XLRE) -2.05%.
#10: Consumer Discretionary -2.22%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) -2.11%.
#11: Communication Services -6.59%, and the Communication Services Select Sector SPDR Fund (XLC) -5.57%.
Below is a chart of the 11 sectors’ YTD performance and how they fared against the S&P 500. For investors looking into the future of what’s happening, take a look at the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.