The stock market turned lower again this week as rising oil prices and fear of inflation shook investors. The S&P 500 fell 1.9%, while the Nasdaq Composite and Dow Jones Industrial Average each declined 2.1%, with all three major averages breaking further below key technical levels by Friday. The S&P 500 narrowly held above the 6,500 level, but stayed below its 200-day moving average reflecting weakening technical momentum.
Growth and rate-sensitive stocks led the downside, with consumer discretionary (-2.7%), technology (-1.9%), and communication services (-1.5%) all posting notable losses. Real estate (-4.1%) and utilities (-5.0%) were among the worst performers as they were pressured by rising interest rates. The energy sector stood out as the clear outperformer, gaining 2.8% for the week as crude oil climbed back toward the $100 per barrel mark. In contrast, consumer staples (-4.5%) and materials (-4.5%) lagged amid broader risk-off sentiment and commodity-related volatility.
While the Fed left rates unchanged last week, their updated Summary of Economic Projections showed higher inflation expectations. Importantly, Fed Chair Jerome Powell acknowledged that the possibility of future rate hikes was at least discussed, signaling a more cautious stance than markets had anticipated. As a result, expectations for rate cuts were pushed further out, with markets even assigning a small probability to a hike by year-end.