Major markets had a rough start to the year, with all five indices closing lower. The S&P 500 saw its first weekly loss of 1.5% after nine consecutive weeks of gains, falling just short of the previous all-time high set almost two years ago. While not a new record, it was a significant achievement for the blue-chip index to effectively retest the prior high. The broader large-cap market experienced milder losses compared to other style boxes, which saw drops exceeding 3 and 4 percentage points.
In the S&P 500 sectors, negative returns were observed in six out of the 11 sectors, with three of the five positive sectors closing 2023 in the red. Bond markets also faced challenges as the Bloomberg Barclays Aggregate Bond Index fell 1.2%, aligning with losses in segments of the equity market. Rising interest rates in the bond market were influenced by a shift in market participants' expectations, with the CME Group's Fed Watch Tool indicating reduced probabilities of a March rate cut, dropping from 88.5% to 60.9%.