Markets close out the week lower, as investors brace themselves for more rate hikes next year

Published Fri, Dec 16 20224:38 PM ESTUpdated Fri, Dec 16 20225:14 PM EST

It was a tale of two halves this week, with stocks rising at the start of the week before reversing course Wednesday afternoon on hawkish sentiment from the Federal Reserve. As expected, the central bank raised interest rates by 50 basis points, taking the overnight borrowing rate to a targeted range between 4.25% and 4.5%. But what irked markets was Fed Chair Jerome Powell's indication the Fed could continue to raise rates for longer to bring inflation under control. The S & P 500 lost around 2.25% for the week, closing out Friday down more than 1%. At the same time, the U.S. government released its monthly consumer price index (CPI) this week, showing prices rose at a slower rate than forecast for November, a further sign inflation may have peaked. But even with increasing data points showing inflation is easing, we think the Fed could continue to raise rates to 5.5% next year. The central bank needs to see inflation not only slow but retreat, with a reduction in wage inflation paramount to the Fed being able to loosen monetary policy. Under the hood, the consumer discretionary sector led to the downside this week, followed by financials and technology. Energy was the only sector to close higher for the week. Meanwhile, the U.S. dollar index is holding just under the 105 level. The price of gold remains at about $1,800 per ounce. West Texas Intermediate (WTI) crude prices are hovering just above $74 a barrel, while the yield on the 10-year Treasury stands at around 3.5%. Looking back No companies in the portfolio reported earnings this week. On the macroeconomic front: Consumers pulled back on spending in November, with retail sales down 0.6% , the U.S. Labor Department reported Thursday. That was a steeper decline than the 0.3% predicted by Wall Street. Also on Thursday, the Fed released data showing that U.S. factory production declined for the time since June , by 0.2%. Initial jobless claims for the week ending Dec. 10 came in at 211,000, a decrease of 20,000 from the prior week and below expectations of 232,000. What's ahead Earnings season is winding down and no Club holdings will be reporting next week. Here are some other earnings reports and economic numbers to watch in the week ahead: Monda