Last week, the Federal Reserve held off raising interest rates after 10 increases in a row, instead waiting to assess how the economy has responded to the sharp rise in rates so far. This week, stock investors also paused for reflection, putting the recent rally on hold until the outlook becomes clearer.

The S&P 500 recorded its first weekly decline since early May, ending the index’s longest streak of gains since 2021. The S&P 500 has risen roughly 13 percent this year, and more than 20 percent since hitting its low point in October last year, crossing a technical threshold for the start of a bull market, a term used by Wall Street to describe a period of investing enthusiasm. Even after a slump on Friday, this week’s fall shaved off just 1.4 percent from the index’s previous gains.

Stocks of smaller companies more exposed to the risk of a slump in the U.S. economy fell further. The Russell 2000 index, which tracks these domestically focused companies, has fallen every day this week and racked up a loss of 2.9 percent for the week — its worst since the turmoil in the banking sector in March.

A more cautious, subdued tone to the past week’s trading reflected the message delivered by Fed officials: More rate increases may be necessary, further raising costs for consumers and companies, but decisions will be guided by signals from the economy in upcoming data releases on inflation, jobs and other indicators. Jerome H. Powell, the Fed chair, said during congressional testimony on Thursday that “the data will tell us what to do” on future rate increases.

In other words, both Fed policymakers and investors are waiting for more information to decide whether interest rates will continue to rise, which will in turn guide how the stock market reacts.

“Markets and the Fed are looking at the same data and having the same thoughts,” said Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute. “They haven’t often been on the same page this year.”

Last week, the Fed acknowledged that the economy had proved more resilient than expected to the central bank’s attempts to slow it down and cool inflation as a result. This week, investors appeared to acknowledge that the economy’s strength may warrant higher rates: For months, investors have questioned the Fed’s resolve to keep raising rates, helping propel stocks upward.

Investor bets on the number of rate increases by the Fed this year have nudged higher, with investors now expecting one more quarter-point increase by the end of the year. That is still less than policymakers’ own forecast, which calls for two increases this year, but it’s closer than it has been in the past: Until recently, investors thought the Fed might cut rates at the end of the year.

The remaining disagreement, some investors say, stems from the caution that some Fed officials have expressed about the outlook. Raphael Bostic, president of the Federal Reserve Bank of Atlanta, had supported previous rate increases. But this week, he said that he expected to hold rates where they were now through the end of the year.

Elsewhere, other central banks continued their rate-raising campaigns this week, with the Bank of England and Norway’s Norges Bank surprising investors with bigger-than-expected moves.

Lauren Goodwin, an economist at New York Life Investments, said that the market and the Fed “have arrived at the same interpretation of the world,” which warrants a wait-and-see approach. What happens next depends on how quickly inflation falls, and “the pace of disinflation has been so uncertain so far,” she said.

Jeanna Smialek contributed reporting.

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