Dow Posts Worst Weekly Drop of 2023 on Aggressive Fed Rate Hike Expectations

The Dow Jones Industrial Average posted its biggest weekly drop of 2023 after sharp losses on Friday, as investors braced for the possibility of more aggressive rate hikes from the U.S. Federal Reserve as U.S. economic data pointed to resilient consumers.

On Friday, the blue chip Dow settled at 32,816.92, down 336.99 or -1.02%. Its 3% loss was its biggest weekly decline since September. It was also the Dow’s fourth straight weekly decline, its longest losing streak for nearly 10 months.

After a strong January, stocks have retreated this month as a slew of economic data amplified worries that the U.S. central bank might have to keep rates higher for longer.

Data on Friday showed the personal consumption expenditures price index, the Fed’s preferred inflation gauge, shot up 0.6% last month after gaining just 0.2% in December. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 1.8% last month, exceeding forecasts for a 1.3% rise.

Fed Funds traders added to bets of at least three more rate hikes this year, with the peak rate seen in the range of 5.25%-5.5% by June.

Cleveland Fed President Loretta Mester said the Fed should raise rates higher than necessary if need be to get inflation fully under control.

Sector Results

The top performing sectors in the Dow Jones Industrial Average were:

Energy, up 1.39%, Materials, up 1.19%, Consumer Staples, up 0.88%, Communications, up 0.81% and Financials, up 0.45%.

The underperforming sectors in the Dow Jones Industrial Average were:

Healthcare, down 0.12%, Information Technology, down 0.04% and Industrials, up 0.01%.

Market Movers

Despite the weak overall performance by the Dow Jones Industrial Average, there were a few winners.

Dow Inc settled at $57.81, up $0.62 or +1.08%. JP Morgan closed at $140.89, up $1.22 or +0.87%. Verizon settled at $38.76, up $0.23 or +0.60%. Chevron closed at $162.45, up $0.52 or +0.32% and Walmart settled at $142.46, up $0.37 or +0.26%.

The biggest losers included:  Boeing, down 4.79%. Microsoft, off by 2.13%. Intel down 1.80%. Apple lower by 1.77% and AMGN, down 1.70%.

Upcoming Reports

Monday features Durable Goods and Pending Home Sales. Conference Board Consumer Confidence and S&P/Case-Shiller Home Price Index will be released on Tuesday. On Wednesday, traders will get the opportunity to react to the ISM Manufacturing PMI. On Friday, the ISM Services PMI report will be released.