Stocks fell 0.3% last week, but the pain was worse than it looked. A 3% market surge ahead of the Federal Reserve’s widely expected interest-rate hike Wednesday proved fleeting and was followed by a nasty hangover of selling in the last two days of trading.

Investors are dissatisfied with the Fed’s indicated pace of future rate hikes. The selloff was also driven by further weakness in commodity prices, which reignited fears of a slowing global economy. Crude lost 2.5% to $34.73 per barrel, the third consecutive weekly drop and a 52-week low.

The Dow Jones Industrial Average fell 137 points, or 0.8%, to 17,128.55, and the Standard & Poor’s 500 gave up 7 to 2005.55. As of Friday the S&P 500 index was down 2.6% for the year, while the Dow was off 4%. The Nasdaq Composite Index is down 10, or 0.2%, to 4923.08.

There was some euphoria going into the Fed meeting, but afterwards the reality of four hikes set in, as weak U.S. economic data was released, says Timothy Ghriskey, chief investment officer of Solaris Asset Management. The market is telling the Fed that the U.S. economy isn’t strong enough for four increases, says Andrew Ahrens, CEO of Ahrens Investment Partners in Lafayette, La.

Economic data outside employment continues to be flat to weak. In November U.S. industrial production fell 0.6%, the Fed said Wednesday, the biggest drop in over three years. The flash purchasing-managers’ index compiled by Markit hit 51.3 from a final reading of 52.8 in December.

“It’s not terrible data but it shows the American economy is choppy and anemic,” Ghriskey adds.

Cameron Hinds, regional chief investment officer for Wells Fargo Private Bank, says that weak oil prices and slowing global growth remain overriding investor concerns. Look for more volatility in coming weeks if oil isn’t seen to be making a bottom, he says.

Volatility might increase over the near term for a couple of other technical reasons. Institutional investors will be selling their dogs to take advantage of tax losses in 2015, both Hinds and Ahrens note. That, plus the likelihood that many market participants will be away in the next two holiday-shortened weeks, and you have the makings of potentially big swings—up or down—in the rest of December because of low trading volume.

(Source: Barrons Online)