Weekly Market Update: December 19, 2022

Market Data as of Week Ending: 12/16/2022 unless noted otherwise

U.S. stock prices experienced another volatile week as growing fears over continued monetary tightening pushed the S&P 500 down (-2.05%) for a second consecutive week. Size and style was mixed with large-cap companies generally underperforming their smaller counterparts as growth stocks mostly held up better than their value counterparts. Nearly every major economic sector recorded sharp losses, with the typically defensive healthcare, consumer staples, and utilities sectors faring the best. Energy was the best performing sector, returning 1.78%, as oil prices rebounded on OPEC and IEA's forecasts for resilient oil demand growth next year. Developed foreign and emerging markets stocks ended the week lower and in line with domestic equities.

U.S. Treasury yields moved lower last week as the 'lower-than-expected' November U.S. inflation print slightly softened consensus expectations for future rate hikes. The 2-year and 10-year ended the week at 4.59% and 3.59%, respectively, as the 2s10s spread remained near its deepest level of inversion in more than four decades. Returns were negative, but mixed, across the quality and duration spectrum as investment-grade corporate bonds proved most resilient. Yields remained relatively flat for both investment grade corporate and high yield bonds, ending the week at 5.1% and just above 8.5%, respectively.

Economic data was generally mixed in what was a week dominated by the Federal Reserve's rate announcement. The week was kicked off with the NFIB smallbusiness index rising to 91.9 in November, showing growing confidence among small-business owners heading into the holiday season. The cost of living rose a meager 0.1% in November, which brought the annual inflation rate to 7.1% from 7.7% in the prior month, suggesting the worst U.S. inflation in 40 years is receding. U.S. retail sales fell 0.6% in November, its biggest decline in almost a year, driven mainly by weak car sales. The Philadelphia Fed manufacturing index improved to a reading of -13.8 in December from -19.4 in the prior month, but was slightly below consensus estimates. The ECB and BOE both raised their key interest rates by 0.5% as both central banks signaled further increases may be required to bring inflation back down to their targets.

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