The market ended the week with relatively modest declines. The S&P 500 declined just 0.1%, but the Nasdaq Composite logged a 0.7% loss. Meanwhile, the Russell 2000 underperformed, dropping 2.1%. The main cause of the market weakness was the two inflation readings suggesting price pressures remain stubborn. Both the Consumer Price Index (CPI) and Producer Price Index (PPI) for February came in higher than expected. The relatively depressed action in the market was due also to the notion that the Fed’s policy decision on Wednesday may provide more clarity on how these reports factor into the Fed’s thinking.
The modestly negative bias in the stock market was also related to a growing sense among some participants that stocks are due for a pullback. The Invesco S&P 500 Equal Weight ETF (RSP) declined 0.7% this week. Six of the 11 S&P 500 sectors logged declines. The rate-sensitive real estate sector was the worst performer by a decent margin, dropping 3.1%. The consumer discretionary sector was the next worst performer, declining 1.2%. Meanwhile, the energy sector saw the largest gain, jumping 3.7% and the materials sector registered a 1.5% gain. The Treasury market had a more pronounced response to the data. The yield on the 10-yr US Treasury jumped 21 basis points this week to 4.30% and the 2-yr note yield settled 23 basis points higher at 4.72%.
Friday was the worst day for the market of the week. The market closed with week with a quarterly options expiration day on that created above-average volume at the NYSE. The Dow Jones Industrial Average closed lower by 0.5%, the S&P 500 (-0.6%), and the Nasdaq Composite (-1.0%). Contributing to the downward pressure on the Nasdaq was a disappointing earnings report from Adobe (ADBE).