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Stocks are reeling, headed for a third straight losing week

U.S. stocks struggled for direction at the open on Friday as investors tried to contain the fierce onslaught of selling that plagued the month ahead of the long weekend.

The S&P 500 (^GSPC) fell 0.1%, while the Dow Jones Industrial Average (^DJI) hovered below a flat line. The tech-heavy Nasdaq Composite (^IKSIC) fell 0.4%.

The US stock and bond market will be closed on Monday, December 26, for the Christmas holiday. Bond markets will close one hour earlier than usual on Friday at 2pm ET.

The core PCE price index — the Fed’s preferred measure of inflation — rose to an annualized 5.5% in November and 0.1% from the previous month, in line with the consensus estimate of economists polled by Bloomberg. The figure marked moderation from readings of 6.1% and 0.3%, respectively, in October.

Core PCE, which strips out the volatile components of food and energy, rose 4.7% year-over-year and 0.2% month-on-month.

Meanwhile, personal spending stagnated in November to its weakest print since July.

Investors will also get readings on the latest University of Michigan consumer sentiment survey 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, this is happening at the same time that consumers continue to cut back on their spending,” said the head of the Investment Alliance of Independent Advisers. Officer Chris Zaccarelli said in a note.

“At the moment, the market is backed into a corner, as stronger spending and higher growth are indirectly bad for the stock market (as they are likely to trigger an even stronger hawkish response from the Fed), while slower spending and growth is directly bad for the stock market, as it implies lower corporate earnings”.

After the Fed’s final 2022 policy decision last week, strategists noted that the most surprising takeaway among officials’ economic projections was an upward revision of their core PCE expectations to 3.5% from 3.1% earlier at the end of 2023. That suggests many analysts that the Federal Reserve will have to keep rates at a high terminal rate until 2023.

“We expect the Fed to revise its forecasts in March, although progress will be slow at first; policymakers appear to have been horrified by the experience of the past year and a half and will want to make sure they don’t move their numbers too early,” Pantheon’s chief macroeconomic economist Ian Shepherdson said in a note. “The markets will not wait.”

NEW YORK, NEW YORK - DECEMBER 21: People walk past the New York Stock Exchange during afternoon trading on December 21, 2022 in New York City.  Stocks closed strongly for the second day in a row today, with the Dow Jones ending up over 500 points amid a better-than-expected report on consumer confidence from the Conference Board.  (Photo by Michael M. Santiago/Getty Images)

NEW YORK, NEW YORK – DECEMBER 21: People walk past the New York Stock Exchange during afternoon trading. (Photo by Michael M. Santiago/Getty Images)

Friday’s moves come after a brutal previous trading day when the S&P, Dow and Nasdaq registered losses of 1.4%, 1% and 2.2%, respectively. Investors were spooked by chipmaker Micron Technology’s warning about the semiconductor industry and strong labor market and consumer spending data that confirmed the outlook for “higher for longer” interest rates.

Oil prices rose on Friday, heading for a big weekly gain as investors anticipated a drop in Russian crude supply. That helped quell concerns about falling demand for U.S. transportation fuel ahead of a winter storm headed for North America. West Texas Intermediate (VTI) crude futures – the US benchmark – rose 2% to $79 a barrel.

U.S. Treasury yields rose, while the U.S. dollar index retreated against a basket of other currencies.

Aleksandra Semenova is a Yahoo Finance reporter. Follow her on Twitter @alekandraandnic

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