NEW YORK, Jan. 8 (Xinhua) — Wall Street wrapped up the first trading week of 2022 with losses as investors assessed faster-than-expected Federal Reserve policy tightening while digesting a slew of economic data.
For the week ending Friday, the Dow and the S&P 500 decreased 0.3 percent and 1.9 percent, respectively, while the tech-heavy Nasdaq shed 4.5 percent.
The S&P U.S. Listed China 50 index, which is designed to track the performance of the 50 largest Chinese companies listed on U.S. exchanges by total market cap, logged a weekly decline of 2.45 percent.
The above market reactions came after the release of the minutes from the Fed’s December policy meeting.
Fed officials anticipated earlier and faster interest rate hikes than previously expected as the economy continues to recover and inflation remains elevated, according to the filing released Wednesday.
Fed officials’ median interest rate projections released mid-December showed that the central bank could raise the federal funds rate — the benchmark interest rate — three times this year from its current record-low level of near zero, up from just one rate hike projected in September.
That marks a major shift from the last time forecasts were updated in September, when 18 Fed officials were evenly split over the need to raise rates in 2022.
After the mid-December policy meeting, the Fed laid out a plan to reduce its monthly asset purchases by 30 billion U.S. dollars starting in January, doubling the pace it announced a month earlier, in response to rising inflation pressures.
The market found the Fed’s tone to be more hawkish than anticipated, Solita Marcelli, chief investment officer at UBS Global Wealth Management Americas, said in a note.
“The minutes are usually uneventful, but certain statements suggest that the Fed is willing to hike rates sooner and faster than what investors were assuming,” Marcelli noted.
Rising interest rates could make stocks, particularly high-flying technology stocks, less attractive, since their valuations are based on future growth and cash flow. When interest rates rise, the value of that future cash flow is discounted.
Investors also parsed some key data to weigh the shape of the economy.
The U.S. Labor Department reported on Friday that U.S. employers added 199,000 jobs in December, with the unemployment rate falling by 0.3 percentage point to 3.9 percent.
The jobs growth is far below the expectations of economists surveyed by The Wall Street Journal, which estimated a gain of 422,000 jobs. It also represented the smallest monthly gain in a year.
A separate report by the Labor Department on Thursday showed that the nation’s initial jobless claims, a rough way to measure layoffs, rose 7,000 to 207,000 in the week ending Jan. 1, higher than the 195,000 market estimate.
The Institute for Supply Management (ISM)’s services index dropped to 62 percent in December from a record 69.1 percent in November. Economists polled by The Wall Street Journal had forecast the index to fall to 66.8 percent.
The December U.S. Manufacturing Purchasing Managers’ Index registered 58.7 percent, down from the November reading of 61.1 percent and below the 60 percent consensus, the ISM reported on Tuesday. Any reading above 50 percent indicates the manufacturing sector is generally expanding.