S&P 500 posts best week in over a month after long-awaited Fed pivot (NYSEARCA:SPY)

The S&P 500 (SP500) on Friday advanced 2.49% for the week to close at 4,719.19 points, posting gains in four out of five sessions. Its accompanying SPDR S&P 500 Trust ETF (NYSEARCA:SPY) added 1.98% for the week.

Wall Street jumped this week after the Federal Reserve surprised investors by delivering its long-anticipated dovish pivot. The central bank on Wednesday at its last monetary policy decision of the year kept rates unchanged. More importantly, its updated dot plot signaled at least three rate cuts in 2024 and chair Jerome Powell refrained from dashing markets’ dovish expectations.

The change in the Fed’s tone helped build upon a rally that was ignited since the end of October. The Dow Jones Industrial Average (DJI) on Wednesday powered past the 37K points mark for the first time. The blue-chip index ended the week at a record closing high of 37,309.22 points and posted an all-time intraday peak of 37,347.60 on Friday. Meanwhile, the S&P 500 (SP500) is now just 77 points short of a record closing high and 99 shy of an intraday peak.

“The doves won the day at the last FOMC meeting of 2023,” Wells Fargo’s Jay Bryson said on Wednesday.

“Having last raised the fed funds rate at the Committee’s July meeting, the decision to leave the policy rate at its current setting marked the third consecutive hold. Along with a somewhat more dovish statement and rate projections, today’s meeting delivered the Fed’s clearest message yet that the torrid hiking cycle that began in March of last year has, in all likelihood, come to an end,” Bryson added.

Global markets rose on Thursday on the back of Wall Street’s advance. However, the euphoria around the Fed pivot was tempered after central bank peers in the UK and Europe held interest rates near record levels and struck a more hawkish tone than their American counterpart. Moreover, New York Fed President John Williams and Atlanta Fed President Raphael Bostic also pushed back on the idea of imminent rate cuts.

Positive sentiment sparked by the Fed carried over into the fixed-income markets this week, with traders snapping up bonds which sent U.S. Treasury yields lower. The 30-year yield (US30Y) tumbled 30 basis points, while the benchmark 10-year yield (US10Y) retreated 32 basis points and fell below the 4% for the first time since August. The 2-year yield (US2Y) declined 27 basis points.

See how Treasury yields have done across the curve at the Seeking Alpha bond page.

Though the Fed and other central bank action dominated headlines this week, the economic calendar also garnered some attention as data on inflation came in. On Tuesday, the consumer price index for November came in a shade higher than predicted, while matching expectations on a core basis. Then on Wednesday, the producer price index came in unchanged on both headline and core. The numbers indicated that a disinflation process was ongoing, and played their part in boosting rate cut hopes.

Among other notable events this week, department store chain Macy’s (M) reportedly received a buyout offer from its investors; Oracle (ORCL) plunged on concerns about its cloud business following its quarterly results; retail giant Costco (COST) scaled a record high following its earnings and the announcement of some $6.7B in special dividends; the world’s largest company by market capitalization Apple (AAPL) saw its stock reaching a new all-time intraday peak of $199.62; and Tesla (TSLA) recalled more than 2M vehicles to address autopilot issues.

Turning to the weekly performance of the S&P 500 (SP500) sectors, all 11 ended in the green, with the exception of Communication Services. Rate-sensitive sector Real Estate topped the gainers with a more than 5% rise. Materials and Industrials rounded out the top three. See below a breakdown of the performance of the sectors as well as their accompanying SPDR Select Sector ETFs from December 8 close to December 15 close:

#1: Real Estate +5.27%, and the Real Estate Select Sector SPDR ETF (XLRE) +5.54%.

#2: Materials +4.00%, and the Materials Select Sector SPDR ETF (XLB) +3.95%.

#3: Industrials +3.57%, and the Industrial Select Sector SPDR ETF (XLI) +3.73%.

#4: Financials +3.57%, and the Financial Select Sector SPDR ETF (XLF) +3.38%.

#5: Consumer Discretionary +3.47%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) +3.48%.

#6: Information Technology +2.52%, and the Technology Select Sector SPDR ETF (XLK) +2.70%.

#7: Energy +2.42%, and the Energy Select Sector SPDR ETF (XLE) +2.52%.

#8: Consumer Staples +1.58%, and the Consumer Staples Select Sector SPDR ETF (XLP) +1.61%.

#9: Health Care +1.49%, and the Health Care Select Sector SPDR ETF (XLV) +1.58%.

#10: Utilities +0.88%, and the Utilities Select Sector SPDR ETF (XLU) +0.88%.

#11: Communication Services -0.10%, and the Communication Services Select Sector SPDR Fund (XLC) +0.77%.

Below is a chart of the 11 sectors’ YTD performance and how they fared against the S&P 500 (SP500). 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.

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