NEW YORK: Wall Street’s main indexes posted their biggest weekly drop of 2023 after sharp losses on Friday, as investors braced for the possibility of more aggressive rate hikes from the US Federal Reserve as US economic data pointed to resilient consumers.

For the blue-chip Dow Jones Industrial Average, the 3% fall was its biggest weekly decline since September. It was also the Dow’s fourth straight weekly decline, its longest losing streak for nearly 10 months.

The S&P 500 and Nasdaq Composite were also down 2.7% and 3.3%, respectively.

After a strong January, stocks have retreated this month as a slew of economic data amplified worries that the US central bank might have to keep rates higher for longer.

Data on Friday showed the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, shot up 0.6% last month after gaining just 0.2% in December. Consumer spending, which accounts for more than two-thirds of US economic activity, jumped 1.8% last month, exceeding forecasts for a 1.3% rise.

Jason Pride, chief investment officer of private wealth at Glenmede, said previous market cycles had witnessed similar delayed reactions by the market to rising interest rates and data releases, which helps explain volatile trading patterns as investors slowly adjust.

“This market has not yet realized the likelihood of a recession that we think is reality,” he said, noting past rate hikes normally had taken between six and 18 months before their effects had fully filtered through into the economy.

“We don’t think (a recession is) a given, but there’s a higher likelihood than the market has embedded in its thought process.” Traders of futures tied to the Fed’s policy rate added to bets of at least three more rate hikes this year, with the peak rate seen in the range of 5.25%-5.5% by June.

Cleveland Fed President Loretta Mester said the Fed should raise interest rates higher than necessary if need be to get inflation fully under control.

The Dow Jones Industrial Average fell 336.99 points, or 1.02%, to 32,816.92, the S&P 500 lost 42.28 points, or 1.05%, to 3,970.04 and the Nasdaq Composite dropped 195.46 points, or 1.69%, to 11,394.94.