S&P 500 ends third straight week lower, no Satna Claus rally amid rate hike worries

The S&P 500 (SP500) on Friday slumped to its third straight weekly loss, falling 0.20% to 3,844.82 points for the final full trading week of the year.

Sentiment has been dampened by worries over the future of interest rate hikes by the Federal Reserve. Economic data released through the week pointed to a still robust economy and tight labor market that is only now beginning to show some signs of cooling due to the central bank’s aggressive rate hikes.

Investors also parsed a surprise hawkish move by the Bank of Japan (BoJ) in the form of an unexpected widening of its yield-curve control. The BoJ was one of the last few global central banks that had clung on to ultra loose monetary policy.

Hopes of a year-end rally, or a so-called “Santa Claus” rally, have been dashed, as market participants are coming to grips with a grim reality that will probably see continued tightening of policy by the Fed in the wake of stubbornly high inflation. Many are preparing for a recession.

Earnings news also took some of the spotlight this week, with shoe giant Nike (NKE) and chipmaker Micron Technology (MU) the most high-profile companies that reported results. Investors cheered Nike’s numbers. On the other hand, Micron’s forecast and plans to cut jobs disappointed.

With Monday being a holiday for Christmas, many traders are already on vacation for the long-weekend.

On the economic front, the final measure of Q3 GDP growth was revised higher to 3.2% versus the expected 2.9%. Additionally, the number of Americans filing for initial jobless claims came in lower than expected. Both sets of data signaled a robust economy and resilient labor market.

On the other hand, November personal consumption expenditure came in cooler than expected, while core PCE – the Fed’s preferred inflation gauge – rose in line with expectations.

The Conference Board’s reading of U.S. consumer confidence and the University of Michigan’s gauge of U.S. consumer sentiment both improved.

The SPDR S&P 500 Trust ETF (NYSEARCA:SPY) on Friday slipped 0.09% for the week alongside the benchmark index. The ETF is -19.38% YTD.

Of the 11 S&P 500 (SP500) sectors, six ended the week in the green, led by Energy. Among the five losers, Consumer Discretionary retreated the most.

See below a breakdown of the weekly performance of the sectors as well as their accompanying SPDR Select Sector ETFs from Dec. 16 close to Dec. 23 close:

#1: Energy +4.38%, and the Energy Select Sector SPDR ETF (XLE) +3.20%.

#2: Utilities +1.42%, and the Utilities Select Sector SPDR ETF (XLU) +0.61%.

#3: Financials +1.40%, and the Financial Select Sector SPDR ETF (XLF) +0.74%.

#4: Consumer Staples +1.00%, and the Consumer Staples Select Sector SPDR ETF (XLP) +0.43%.

#5: Health Care +0.81%, and the Health Care Select Sector SPDR ETF (XLV) +0.42%.

#6: Industrials +0.76%, and the Industrial Select Sector SPDR ETF (XLI) +0.30%.

#7: Real Estate -0.01%, and the Real Estate Select Sector SPDR ETF (XLRE) -1.12%.

#8: Materials -0.10%, and the Materials Select Sector SPDR ETF (XLB) -0.71%.

#9: Communication Services -0.40%, and the Communication Services Select Sector SPDR Fund (XLC) -0.52%.

#10: Information Technology -2.04%, and the Technology Select Sector SPDR ETF (XLK) -2.26%.

#11: Consumer Discretionary -3.10%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) -3.35%.

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.