S&P 500 ends lower for second straight week as recession fears spur selloff

The S&P 500 (SP500) on Friday ended the week 2.1% lower amid renewed fears of the economy sinking into a recession next year as major central banks may not ease up on rate hikes just yet.

The benchmark index posted losses in three out of five sessions, with hopes of a Santa rally this year quickly fading.

The week saw the Federal Reserve, European Central Bank and Bank of England turn more hawkish as inflation remains stubbornly high. San Francisco Fed President Mary Daly said the Fed still has a “long way to go” to get inflation down to 2%.

The Fed’s commentary on Wednesday implies it “is fully aware there’s a good chance that the upcoming economic slowdown will ultimately lapse into a recession, and this is a risk the Fed is willing to take,” said SA contributor James Kostohryz.

Meanwhile, retail inflation came in cooler than expected, prompting a brief buying spree, after which investors turned wary ahead of the Fed meet.

But a string of disappointing economic data this week only increased the likelihood of a recession ahead.

Retail sales were weaker than expected, showing a poor start to the holiday shopping season. Import and exports prices continued to slide, while the S&P Global composite PMI was lower than forecast as business activity fell at the joint-sharpest rate since May 2020.

The Philly Fed Outlook showed its sixth negative reading in the past seven months, while Empire State manufacturing and weekly jobless claims declined more than expected.

The SPDR S&P 500 Trust ETF (NYSEARCA:SPY) on Friday slipped 2.5% for the week alongside the benchmark index. The ETF is -19.8% YTD.

Of the 11 S&P 500 (SP500) sectors, 10 ended the week in the red, with Consumer Discretionary as the top loser. Energy inched higher after a big drop last week.

See below a breakdown of the weekly performance of the sectors as well as their accompanying SPDR Select Sector ETFs from Dec. 9 close to Dec. 16 close:

#1: Consumer Discretionary -3.63%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) -3.96%.

#2: Information Technology -2.67%, and the Technology Select Sector SPDR ETF (XLK) -2.62%.

#3: Financials -2.50%, and the Financial Select Sector SPDR ETF (XLF) -2.40%.

#4: Communication Services -2.47%, and the Communication Services Select Sector SPDR Fund (XLC) -2.81%.

#5: Real Estate -2.38%, and the Real Estate Select Sector SPDR ETF (XLRE) -2.09%.

#6: Materials -2.34%, and the Materials Select Sector SPDR ETF (XLB) -2.35%.

#7: Health Care -1.83%, and the Health Care Select Sector SPDR ETF (XLV) -1.78%.

#8: Consumer Staples -1.40%, and the Consumer Staples Select Sector SPDR ETF (XLP) -1.36%.

#9: Industrials -1.10%, and the Industrial Select Sector SPDR ETF (XLI) -0.98%.

#10: Utilities -0.55%, and the Utilities Select Sector SPDR ETF (XLU) -0.49%.

#11: Energy +1.72%, and the Energy Select Sector SPDR ETF (XLE) +2.03%.

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.