The S&P 500 (Index: SPX) lost 3.3% of its value in the trading week ending on 9 December 2022, closing the week at 3,934.38. The S&P 500 is 18.0% below its record high peak of 4,796.56 recorded on the first trading day of 2022.
The index' trajectory swung to the bottom edge of the latest redzone forecast range on the alternative futures chart and bounced along it during the week. This range is based on the assumption investors would be transitioning their forward-looking focus from 2022-Q4 to 2023-Q1 in the period from 22 November to 23 December 2022.
The market environment continues to force investors to pay lots of attention to how the Federal Reserve will be changing interest rates in the weeks and months ahead. A half point rate hike is anticipated to be set when the Fed's Federal Open Market Committee completes its upcoming two-day meeting on 14 December 2022, after which, we anticipate investors will fully shift to the more distant future quarters of either 2023-Q1 or 2023-Q2.
If investors focus predominantly on 2023-Q1, the trajectory of the S&P 500 will remain within the redzone forecast range. If investors shift a larger portion of their attention further forward in time to 2023-Q2, the trajectory will drop below this indicated range.
Which outcome happens will depend on what new information becomes available during the week. Speaking of which, here are the market-moving headlines we found in the past week's newstreams.
- Monday, 5 December 2022
- Signs and portents for the U.S. economy:
- U.S. services industry regains steam; factory orders accelerate
- U.S. factory orders beat expectations in October
- Oil falls over 3% after data raises Fed interest rate worries
- Bigger trouble developing in China, Japan, Eurozone:
- China services activity shrinks to 6-month lows - Caixin PMI
- Japan's service-sector activity growth hits 3-month low -PMI
- Euro zone likely heading into mild recession-PMI
- ECB minions getting excited for December rate hike:
- Wall St slides as services data spooks investors about Fed rate hikes
- Tuesday, 6 December 2022
- Signs and portents for the U.S. economy:
- U.S. trade deficit widens as goods exports hit seven-month low
- U.S banks warn of recession risk, inflation hurting consumers, shares hit
- Bigger trouble developing in the Eurozone:
- Italy statistics bureau slashes 2023 growth forecast amid downside risks
- Analysis-Europe's inflation problem will linger for years to come
- Central bank minions continue rate hikes:
- Australia central bank raises rates to 10-year high, says more needed
- Kuwait central bank raises discount rate by half percentage point – statement
- ECB minions plan to hike rates, claim it's natural:
- Wall Street slumps on further recession talk, S&P posts 4th decline
- Wednesday, 7 December 2022
- Signs and portents for the U.S. economy:
- Fed minions surprised President Biden's inflation wasn't transitory:
- Bigger trouble developing in Australia:
- Even bigger trouble developing in China:
- China forced to lift zero-COVID lockdowns to boost economy; Eurozone economy better than expected:
- 'Daylight is here': China travel searches surge as public cheers COVID easing
- Euro zone economic growth revised up with household, business support
- More central bank minions continue rate hikes:
- India central bank says inflation battle not over, raises rates again
- Bank of Canada makes big rate hike, hints it may the last one
- Bank of England set to raise rates to 3.5% after inflation hits 41-year high
- BOJ minions holding out to keep never-ending stimulus alive despite prediction they'll be forced to rein it in:
- BOJ's Nakamura says it is premature to tweak ultra-easy policy
- BOJ may ditch yield cap next year as inflation perks up-academic
- ECB minions told Eurozone inflation will continue in 2023:
- Wall St ends lower after choppy trading from rising recession worries
- Thursday, 8 December 2022
- Signs and portents for the U.S. economy:
- U.S. labor market still tight despite continuing claims hitting 10-month high
- U.S. Online goods prices fall in positive sign for Fed - Adobe
- Column-Oil prices slump as receding price-cap threat unmasks worsening demand: Kemp
- China's leaders expect ending zero-COVID lockdowns to boost China economy:
- Bigger trouble developing in China:
- S&P 500, Nasdaq snap losing streaks after jobless claims rise
- Friday, 9 December 2022
- Signs and portents for the U.S. economy:
- U.S. producer prices increase; near-term inflation expectations ease
- Recession drumbeat gets louder as more U.S. CEOs strike mellow note for 2023
- U.S. household wealth falls for third consecutive quarter
- Fed minions seeing more demand for emergency loans from banks:
- Signs of easing inflation in China, Eurozone as consumer demand falls:
- China's producer prices fall, consumer inflation slows on soft demand
- German households less pessimistic on inflation, survey shows
- BOJ minions determined to keep never-ending stimulus alive:
- ECB minions growing excited to deliver smaller rate hike as Eurozone falls into recession:
- Wall Street ends lower as investors digest economic data
The CME Group's FedWatch Tool maintained its projection of a half point rate hike at the Fed's upcoming 14 December (2022-Q4) meeting, but now anticipates another half point rate hike at its 1 February (2023-Q1). The Federal Funds Rate would then be boosted by a quarter point to a peak of 5.00-5.25% in May (2023-Q2). Looking further forward, the FedWatch tool now projects a quarter point rate cuts in 2023 as early as July (2023-Q3) followed by a second in December (2023-Q4) in response to expected recessionary conditions. A growing likelihood for a rate cut in 2023-Q2 is what we think would draw investors' forward-looking focus to this quarter, which would send the S&P 500 lower.
The Atlanta Fed's GDPNow tool's projection for real GDP growth in 2022-Q4 rose to 3.2% from last week's +2.8% estimate. The "Blue Chip consensus" has also been updated to anticipate slightly over 1% real growth for the current quarter of 2022-Q4.
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