S&P 500 takes breather, but remains on course for best week since March

Investing.com -- The S&P 500 stumbled Friday, but still remained on course for its best week since March after the Federal Reserve paused rate hikes earlier this week.

The S&P 500 fell 0.2%, but is up about 3% for the week, its best performance since march. The Dow Jones Industrial Average added 0.1%, or 49 points, and the Nasdaq fell 0.5%.

Technology stocks were the drag on the broader market, paced by a 1% decline in Alphabet (NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT), while semiconductor stocks also ran out of steam following an AI-led rally.

Adobe Systems (NASDAQ:ADBE), however, rose more than 1% after lifting its annual outlook on earnings following quarterly results that topped Wall Street estimates on both the top and bottom lines.

The software maker said that it was focused on “adoption (not revenue) near-term, and that any 4Q/Nov AI revenue lift will be immaterial and it will announce pricing details later this year,” UBS said, though adding that most investors are likely to “stay patient.”

Defensive sectors of the market including utilities and consumer staples, meanwhile, were in the ascendency, pointing to some investor caution ahead of the long Juneteenth weekend and possible profit taking following a rip-roaring rally in stocks.

On the economic front, a preliminary reading of U.S. consumer sentiment on the economy rose more than expected in May, while near-term inflation expectations fell to a two-year low, the University of Michigan Consumer Sentiment Index showed Friday.

The positive data, however, aren’t likely to impact “the chances of a July hike,” said Jefferies, noting that the “levels of inflation expectations are too high, but the pace of change is encouraging.”

The Federal Reserve earlier this week paused rate hikes, but lifted its projection, or dot plots, on rates, forecasting two more hikes this year.

Some on Wall Street, however, aren’t convinced that the Fed will deliver further hikes and continue to bet that the Fed’s tightening cycle is over.

“We dismiss the dot plot completely – it has almost no utility as a predictive piece of data,” Jay Pelosky, TPW Advisory Founder and Principal said in a Friday note. “We are not alone in this point of view,” Pelosky added, citing analysis by Bloomberg showing “the median forecast rarely, if ever, coordinated with actual policy rates."