S&P 500 jumps nearly 2% for the week as traders come to grips with Fed stance

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The S&P 500 (SP500) on Friday added 1.90% for the week to end at 4,045.54 points, posting gains in three out of five sessions. Its accompanying SPDR S&P 500 Trust ETF (NYSEARCA:SPY) rose 1.97% for the week.

With the weekly advance, the benchmark index managed to snap a three-week losing streak. The index also closed out a volatile February with a nearly 3% fall on Tuesday, weighed down by Federal Reserve rate hike concerns sparked by strong economic data.

That pattern initially continued this week. However, on Thursday a Fed official said the central bank could be in a position to pause its rate hiking this summer, which helped to prop up markets. That positivity carried over onto Friday and helped the S&P 500 (SP500) to its weekly rise.

Market participants have this week recalibrated their outlook for the peak terminal rate to now reach at least 5.5%, with a fraction of the market even considering 6%. Traders appear to have become more comfortable with the direction of the central bank.

Meanwhile, economic data this week has suggested both a flourishing economy and a tight labor market. With the Fed in a hawkish mood, any numbers that point to a robust economy have sparked worries about higher interest rates.

On Wednesday, ISM's gauge of manufacturing activity for February rose for the first time in six month, though staying in contraction territory. On top of that, the S&P manufacturing PMI rose for February. The reports showed that there was still strength in the economy and that the cooling effects of elevated interest rates were yet to be felt.

On Thursday, the number of Americans filing for initial jobless claims unexpectedly slipped. Moreover, fourth quarter unit labor costs rose, even as average productivity marked its largest annual slump in nearly 50 years. The numbers demonstrated continued resilience in the labor market.

The weekly economic calendar also saw a surprising fall in the February Chicago PMI and the Conference Board's measure of monthly consumer confidence.

The week also saw the fourth quarter earnings season start to wind down. Notable companies that reported their results included retail giants Target (TGT) and Costco (COST), department store chain Macy's (M), electric vehicle maker Rivian Automotive (RIVN), home improvement retailer Lowe's (LOW) and cloud computing company Salesforce (CRM).

Turning to the weekly performance of the S&P 500 (SP500) sectors, nine of the 11 ended in the green, led by Materials and Communication Services. Utilities and Consumer Staples were the two sectors to end in the red. See below a breakdown of the weekly performance of the sectors as well as their accompanying SPDR Select Sector ETFs from Feb. 24 close to March 3 close:

#1: Materials +4.02%, and the Materials Select Sector SPDR ETF (XLB) +4.20%.

#2: Communication Services +3.27%, and the Communication Services Select Sector SPDR Fund (XLC) +2.85%.

#3: Industrials +3.25%, and the Industrial Select Sector SPDR ETF (XLI) +3.35%.

#4: Energy +2.94%, and the Energy Select Sector SPDR ETF (XLE) +3.07%.

#5: Information Technology +2.93%, and the Technology Select Sector SPDR ETF (XLK) +2.98%.

#6: Consumer Discretionary +1.61%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) +1.70%.

#7: Real Estate +1.55%, and the Real Estate Select Sector SPDR ETF (XLRE) +1.63%.

#8: Financials +0.79%, and the Financial Select Sector SPDR ETF (XLF) +0.93%.

#9: Health Care +0.51%, and the Health Care Select Sector SPDR ETF (XLV) +0.51%.

#10: Consumer Staples -0.41%, and the Consumer Staples Select Sector SPDR ETF (XLP) -0.23%.

#11: Utilities -0.69%, and the Utilities Select Sector SPDR ETF (XLU) -0.54%.

Below is a chart of the 11 sectors' YTD performance and how they fared against the S&P 500. For investors looking into the future of what's happening, take a look at the Seeking Alpha Catalyst Watch to see next week's breakdown of actionable events that stand out.