The shares are falling, heading for a third week of losses in a row
US stocks extended losses on Friday morning as a vicious bout of selling that has plagued the month continued ahead of the long holiday weekend.
The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) each slipped 0.5% after struggling for direction at the open. The tech-heavy Nasdaq Composite (^IXIC) fell 0.9%.
The US stock and bond markets will be closed on Monday 26 December for Christmas Day. The bond markets close an hour earlier than usual on Friday at 2 p.m. ET.
The core PCE price index — the Fed’s preferred inflation measure — rose 5.5% annually in November and 0.1[ads1]% from the previous month, in line with consensus estimates from economists surveyed by Bloomberg. The figure marked a moderation from measurements of 6.1% and 0.3% respectively in October.
Core PCE, which strips out the volatile food and energy components, rose 4.7% year-on-year and 0.2% month-on-month.
Meanwhile, private consumption stagnated in November to the weakest print since July.
Investors will also get readings on the latest consumer survey from the University of Michigan and new home sales.
“The Federal Reserve’s preferred measure of inflation continues to decline, which is good news for its most important target, but unfortunately for the market, it comes at the same time that consumers continue to reduce spending,” Independent Advisor Alliance Chief Investment Officer Chris Zaccarelli said in a note .
He added: “At this point, the market has been backed into a corner, as more robust spending and higher growth is indirectly bad for the stock market (because it is likely to trigger an even stronger hawkish response from the Fed), while slower spending and growth is directly bad for the stock market, because it means lower corporate income.”
After the Fed’s final 2022 policy decision last week, strategists pointed out that the most surprising data point among officials’ economic projections was an upward revision of their core PCE expectations to 3.5% from 3.1% previously by the end of 2023. This suggested many analysts that the Federal Reserve will need to keep rates at a high terminal rate through 2023.
“We expect the Fed to revise down its forecasts as soon as March, although progress will initially be slow; policymakers appear to have been scarred by the experience of the past year and a half and will want to be sure they don’t move the numbers down too early,” Pantheon Macroeconomics chief economist Ian Shepherdson said in a note. “The markets will not wait.”
Friday’s move comes after a brutal previous trading day in which the S&P, Dow and Nasdaq recorded losses of 1.4%, 1% and 2.2% respectively. Investors were spooked by a warning from chip maker Micron Technology about the semiconductor industry and robust labor market and consumption data that confirmed the outlook for “higher for longer” interest rates.
Oil prices rose on Friday, heading for a big weekly gain as investors expected a drop in the supply of Russian crude. That helped ease concerns about a drop in demand for U.S. transportation fuel ahead of a winter storm moving toward North America. West Texas Intermediate (WTI) crude oil futures – the US benchmark – rose 2% to $79 a barrel.
US Treasury yields rose, while the dollar index retreated against a basket of other currencies.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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