The loss against former U.S. coach Pia Sundhage prevents the Americans from reaching the final in an event they’ve won nine times in 18 previous trips.
Abby Wambach’s penalty shot was saved by Sweden goalkeeper Hedvig Lindahl before Lotta Schelin headed home what proved to be the winner in the 26th minute.
Lindahl denied late chances from American substitutes Kristie Mewis and Sarah Hagen. Mewis forced Lindahl into a leg save on a break in the 85th minute and shot wide from close range in stoppage time at Municipal Stadium in Albufiera, Portugal.
The Americans played without forward Alex Morgan, who is sidelined with an ankle injury.
Sweden leads Group B with six points, while the U.S. has one point with one game left against Denmark.
The Americans went into the match knowing they needed a victory after opening with a 1-1 tie against Japan — the last team to beat the U.S. at the Algarve Cup two years ago.
U.S. midfielder Amy Rodriguez was taken down inside the area to set up the 17th-minute spot kick, but Lindahl guessed correctly to push Wambach’s penalty past the right post.
Wambach was active at the start but the early opportunities were lost. Then Sofia Jakobsson won the ball from Ali Krieger in the right corner and sent in a cross that Schlein headed past goalkeeper Hope Solo.
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