A ninth round of voting in the U.S. House of Representatives yet again failed to deliver a speaker on Thursday, as top House Republican Kevin McCarthy keeps facing opposition from too many fellow GOP lawmakers. Seventeen Republicans again voted for GOP Rep. Byron Donalds of Florida rather than McCarthy, while Reps. Lauren Boebert of Colorado, Josh Brecheen of Oklahoma and Matt Gaetz of Florida backed Rep. Kevin Hern of Oklahoma, who has been supporting McCarthy. Gaetz had backed former President Donald Trump for speaker in Thursday’s prior rounds of voting. GOP Rep. Victoria Spartz of Indiana again voted “present.” The House last had nine rounds of voting for a speaker election in 1923, and the chamber now must vote a 10th time.
Tag: COMP
-
Dow drops 300 points as strong jobs data suggests more aggressive Fed rate hikes
U.S. stocks finished lower on Thursday, with the Dow dropping more than 300 points, as strong jobs data and hawkish Fed commentary signaled more aggressive Federal Reserve interest-rate hikes to come. The S&P 500
SPX,
-1.16%
shed 44.87 points, or 1.2%, to finish at 3,808.10. The Nasdaq Composite
COMP,
-1.47%
dropped 153.52 points, or 1.5%, to 10,305.24. The Dow Jones Industrial Average
DJIA,
-1.02%
retreated 339.69, or 1%, to 32,930.08. Private payrolls data from ADP showed jobs growth last month was far more robust than economists had expected, stoking concerns that Friday’s monthly payrolls report might also surprise to the upside. One stock-market analyst told MarketWatch earlier that “good news” about the labor market is “bad news” for stocks and bonds, as it means the Fed has failed to undercut the labor market, a key step toward suppressing inflation. -
Tesla Sets a Delivery Record. Wall Street Will Still Cringe.
Tesla
stock had a rocky 2022, and
Tesla
investors hoped that fourth-quarter EV deliveries would help get 2023 started with a bang. It looks like they’ll be disappointed, as the actual numbers fell short of expectations, sending Tesla stock lower in premarket trading Tuesday.On Monday, Tesla (ticker: TSLA) reported fourth-quarter deliveries of 405,278. It’s a record result, but it missed Wall Street expectations.
-
The Dow Buried the Nasdaq. Now, What Happens Next.
Y2K is back in a big way in the fashion world, but history isn’t just repeating itself on the runway. The stock market appears to be nostalgic for the early 2000s, as it is once again turning its back on tech.
There were few places for investors to hide in this year’s bloodbath, but those exposed to the tech-heavy
Nasdaq Composite
index undoubtedly had it the worst. Through the close Friday, the last trading day of the year, the Nasdaq had plummeted 33.1% in 2022, falling 8.7% in the past month alone. -
Stocks cement worst year since 2008 as S&P 500 logs 4th biggest drop since inception
U.S. stocks polished off their worst year since 2008 with a loss on Friday, bringing the year-to-date decline for the S&P 500 to 19.4%, its largest calendar-year drop since 2008, Dow Jones Market Data show. The same holds true for the Dow Jones Industrial Average, which shed 8.8% this year, and the Nasdaq Composite, which lost 33.1%. On Friday, as stocks pared their losses heading into the close on the last session of the year, the S&P 500
SPX,
-0.25%
fell 9.78 points, or 0.2%, to finish at 3,839.50, while the Nasdaq Composite
COMP,
-0.11%
fell 11.61 points, or 0.1%, to 10,466.48, and the Dow
DJIA,
-0.22%
fell 73.55 points, or 0.2%, to 33,147.25. 2022 also marked the fourth-worst year for the S&P 500 since its inception in 1957. The only years where stocks fared worse were 2002, 1974 and 2008, according to DJMD. As previously high-flying megacap technology stocks and other interest-rate sensitive assets crumbled, value stocks outperformed this year, sending the Dow to its biggest calendar-year outperformance vs. the Nasdaq since 2000. The blue-chip gauge also recorded its biggest outperformance vs. the S&P 500 since the index’s creation. Energy stocks were a lone bright spot, as the S&P 500 energy sector recorded its best year on record with a 59% gain. -
U.S. stocks fall on last trading day of 2022, booking monthly losses and worst year since 2008
U.S. stocks ended lower Friday, booking their worst annual losses since 2008, as tax-loss harvesting along with anxieties about the outlook for corporate profits and the U.S. consumer took their toll.
How stock indexes traded
-
The Dow Jones Industrial Average
DJIA,
-0.22%
slipped 73.55 points, or 0.2%, to 33,147.25. -
The S&P 500
SPX,
-0.25%
shed 9.78 points, or 0.3%, to 3,839.50. - The Nasdaq Composite dipped 11.61 points, or 0.1%, to 10,466.48.
For the week, the Dow fell 0.2%, the S&P 500 slipped 0.1% and the Nasdaq slid 0.3%. The S&P 500 dropped for a fourth straight week, its longest losing streak since May, according to Dow Jones Market Data.
All three major benchmarks suffered their worst year since 2008 based on percentage declines. The Dow dropped 8.8% in 2022, while the S&P 500 tumbled 19.4% and the technology-heavy Nasdaq plunged 33.1%.
What drove markets
U.S. stocks fell Friday, closing out the last trading session of 2022 with weekly and monthly losses.
Stocks and bonds have been crushed this year as the Federal Reserve raised its benchmark interest rate more aggressively than many had expected as it sought to crush the worst inflation in four decades. The S&P 500 ended 2022 with a loss of 19.4%, its worst annual performance since 2008 as the index snapped a three-year win streak, according to Dow Jones Market Data.
“Investors have been on edge,” said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management, in a phone interview Friday. “It seems as though the ability to drive down prices is probably a bit easier given just how crummy the year’s been.”
Stock indexes have slumped in recent weeks as hopes for a Fed policy pivot faded after the central bank in December signaled that it would likely wait until 2024 to cut interest rates.
On the final day of the trading year, markets were also being hit by selling to lock in losses that can be written off of tax bills, a practice known as tax-loss harvesting, according to Kim Forrest, chief investment officer at Bokeh Capital Partners.
An uncertain outlook for 2023 was also taking its toll, as investors fretted about the strength of corporate profits, the economy and the U.S. consumer with fourth-quarter earnings season looming early next year, Forrest said.
“I think the Fed, and then earnings in the middle of January — those are going to set the tone for the next six months. Until then, it’s anybody’s guess,” she added.
The U.S. central bank has raised its benchmark rate by more than four percentage points since the beginning of the year, driving borrowing costs to their highest levels since 2007.
The timing of the Fed’s first interest rate cut will likely have a major impact on markets, according to Forrest, but the outlook remains uncertain, even as the Fed has tried to signal that it plans to keep rates higher for longer.
On the economic data front, the Chicago PMI for December, the last major data release of the year, came in stronger than expected, climbing to 44.9 from 37.2 a month prior. Readings below 50 indicate contraction territory.
Next year, “we’re more likely to shift towards fears around economic growth as opposed to inflation,” said Heppenstall. “I think the decline in growth will eventually lead to a more meaningful decline in inflation.”
Read: Stock-market investors face 3 recession scenarios in 2023
Eric Sterner, CIO of Apollon Wealth Management, said in a phone interview Friday that he’s expecting the U.S. could fall into a recession next year and that the stock market could see a new bottom as companies potentially revise their earnings lower. “I think earnings expectations for 2023 are still too high,” he said.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite booked modest weekly declines, adding to their December losses. For the month, the Dow fell 4.2%, while the S&P 500 dropped 5.9% and the Nasdaq sank 8.7%, FactSet data show.
Read: Value stocks trounce growth equities in 2022 by historically wide margin
As for bonds, the U.S. Treasury market was set to record its worst year since at least the 1970s.
The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.879%
has jumped 2.330 percentage points this year to 3.826%, its largest annual gain on record based on data going back to 1977, according to Dow Jones Market Data.Two-year Treasury yields
TMUBMUSD02Y,
4.423%
soared 3.669 percentage points in 2022 to 4.399%, while the 30-year yield
TMUBMUSD30Y,
3.971%
jumped 2.046 percentage points to end the year at 3.934%. That marked the largest calendar-year increases ever for each based on data going back to 1973, according to Dow Jones Market Data.Outside the U.S., European stocks capped off their biggest percentage drop for a calendar year since 2018, with the Stoxx Europe 600
SXXP,
-1.27% ,
an index of euro-denominated shares, falling 12.9%, according to Dow Jones Market Data.Read: Slumping U.S. stock market lags these international ETFs as 2022 comes to an end
Companies in focus
-
Tesla Inc.
TSLA,
+1.12%
shares rose 1.1% after their worst run of losses in more than four years. -
Southwest Airlines
LUV,
+0.87%
shares gained 0.9% as the company said it expected its holiday travel fiasco to impact fourth-quarter profits. -
Las Vegas Sands Corp.
LVS,
+2.10%
was among the best performers in the S&P 500 index on Friday, with its shares ending 2.1% higher, as it confirmed renewed gaming concessions in Macau.
—Steve Goldstein contributed to this article.
-
The Dow Jones Industrial Average
-
U.S. stocks close sharply higher in year-end rally after jobless claims data deemed ‘welcome news for the Fed’
U.S. stock indexes finished sharply higher on Thursday, the second-to-last trading session of the year, with the Nasdaq Composite jumping 2.6%, erasing losses from earlier in the week.
The three main indexes built on premarket gains after U.S. weekly jobless claims data showed the number of workers receiving benefits has climbed to the highest level since February, a tentative sign that the Federal Reserve’s interest-rate hikes might be slowing economic growth and inflation.
How stocks traded
-
The S&P 500
SPX,
+1.75%
rose 66.06 points, or 1.8%, to end at 3,849.28. -
Dow Jones Industrial Average
DJIA,
+1.05%
added 345.09 points, or 1.1%, finishing at 33,220.80. -
Nasdaq Composite
COMP,
+2.59%
climbed 264.80 points, or 2.6%, to finish at 10,478.09.
On Wednesday, the Nasdaq Composite dropped 1.4% to 10,213, its lowest closing level of the year. The S&P 500 is up more than 6% from its 2022 low from mid-October, but the large-cap index remains down 19.2% year-to-date, FactSet data show.
What drove markets
The penultimate session of 2022 showed tentative signs of delivering some much needed festive cheer for the stock market as a hope for “Santa Claus rally” had earlier failed to materialize.
MarketWatch Live: Is that you, Santa Claus?
Stocks advanced on Thursday as data showed the number of Americans receiving more than a single week of unemployment benefits had climbed by 41,000 last week to 1.71 million, the highest level in 10 months.
The jobless-claims data “points to a loosening in the labor market, which is welcome news for the Fed,” said Larry Adam, chief investment officer at Raymond James, in a tweet.
However, analysts at Citi still think the claims data indicates a still-very-tight labor markets compared to historical levels.
“While both initial and continuing claims increased this week, they remain within the levels of late 2019,” wrote Gisela Hoxha, U.S. economics research analyst at Citi. “Anecdotes of company layoffs have increased in recent months, particularly in the tech sector. While it could be hard to disentangle the seasonal effects from the announced layoffs, in our view there is no significant evidence of them showing up in the claims data yet.”
Some of those layoffs could be taking effect a couple months later as employees might be kept on payroll for some time after the announcement, which will become significant signs of weakness in the labor market in 2023, Hoxha added.
Stocks were on track to finish what’s set to be the worst year since 2008 not far from 2022 lows. The S&P 500’s 52-week closing low at 3,577.03 was hit on Oct. 12.
Still, the three indexes managed to erase losses from earlier in the week on Thursday. Nasdaq Composite was down 0.2% this week, while the S&P 500 gained 0.1% and the Dow was nearly flat as of Thursday’s close. If the S&P 500 can hold on to weekly gains through Friday, it would mark the end of a three-week losing streak that has been the index’s longest since September, FactSet data show.
Companies in focus
-
Tesla Inc.
TSLA,
+8.08%
shares finished 8.1% higher on Thursday after posting its first rise in eight sessions Wednesday. The electric-vehicle maker’s shares had declined in seven consecutive sessions, their worst losing streak since a seven-session run that ended on Sept. 15, 2018. -
Southwest Airlines
LUV,
+3.70%
remains in focus as the airline tries to recover from logistical issues that caused thousands of flight cancellations over the past week. The stock fell 11% over the past two days, but rose 3.7% in Thursday session. -
General Electric’s
GE,
+2.17%
spinoff of GE HealthCare Technologies will join the S&P 500 index when it begins trading as a separate public company on Jan. 4. GE HealthCare will replace Vornado Realty Trust
VNO,
+1.63% ,
which will move to the S&P MidCap 400. Vornado will replace logistics company RXO
RXO,
+8.39% ,
which will move to the S&P SmallCap 600. GE HealthCare — trading on a when-issued basis — rose 0.9%, while Vornado gained 1.6% and RXO jumped 8.4%. -
Cal-Maine
CALM,
-14.50%
shares ended 14.5% lower after its quarterly earnings came in below Wall Street forecasts. Cal-Maine reported record sales for the quarter as an avian flu outbreak continued to limit the supply of eggs, driving prices sharply higher. The company also said there were no positive tests for avian flu at any of its production facilities, as of Wednesday.
— Jamie Chisholm contributed to this article
-
The S&P 500
-
Did 2022 break Wall Street’s ‘fear gauge’? Why the VIX no longer reflects the sorry state of the stock market
U.S. stocks are about to cap off their worst year since 2008. But investors wouldn’t know it by glancing at what’s often referred to as Wall Street’s favorite fear gauge, which has recently failed to reach new heights as stocks tumbled to fresh lows.
The Cboe Volatility Index
VIX,
-3.16% ,
better known as the VIX, is on track to finish 2022 not far off its long-term average despite widespread pain across markets. The VIX, based on trading in S&P 500 index options, serves as an indicator of expected volatility in the index over the coming 30-day period.After topping out at 36.45 on March 7, it repeatedly failed to make new highs for the year, according to data from FactSet, even as stocks tumbled to their lowest levels in years in June and again in September and October.
Nicholas Colas, co-founder of DataTrek Research, highlighted the phenomenon in several research notes to his clients this year.
Not only is the S&P 500 on track to finish the year down roughly 20%, 2022 has also been the most consistently choppy year for stocks in more than a decade by at least one measure.
The index has recorded 46 moves of 2% in either direction since the start of the year, the most since 2009, according to Dow Jones Market Data — narrowly surpassing the number from 2020. That’s roughly four times the 10-year average of 11.3 per year.
The VIX fell 3% on Thursday to 21.46 in afternoon trading as the S&P 500
SPX,
+1.75% ,
Dow Jones Industrial Average DJIA and Nasdaq Composite COMP all headed for daily gains after the Nasdaq booked its lowest closing level of the year on Wednesday.A ‘really terrible year’
Perhaps counterintuitively, Colas and others see the subdued VIX as a potential cause for concern. This is because a spike in the fear gauge has typically preceded stock-market bottoms in recent decades.
Colas and others refer to the phenomenon as “capitulation,” meaning that a surge in the VIX means that sentiment in the market has grown so dire that the beginning of a market turnaround is likely at hand.
The VIX surged above 80 before stocks bottomed out in March 2009, and again in March 2020. Colas has said in the past that levels above 40 are needed to signal that capitulation is at hand. Volatility typically rises fastest when stocks are falling, market strategists said.
The lack of a clear signal that bears are reaching a point of exhaustion has made some analysts wonder if the market’s lows might still lie ahead.
See: Wall Street’s ‘fear gauge’ still not signaling stock-market bottom is near, analysts say
“Volatility seems too low,” said Danny Kirsch, head of the options desk at Piper Sandler, during a phone interview with MarketWatch this week. “I’d say the VIX should be in its mid-to-high 20s, as opposed to barely 20.”
“We had a really terrible year. There was massive wealth destruction, and yet the cost to hedge going forward hasn’t really changed,” Kirsch added.
Is the VIX ‘broken’?
Comparing the VIX’s 2022 performance to 2008 recently led Michael Kramer, founder of Mott Capital, to conclude that the gauge may be “broken” in a tweet published on Wednesday.
Others have pushed back against this notion, arguing that while the VIX has been “somewhat low,” it’s still elevated compared with recent market history.
To wit, the VIX’s current level is still more than twice its record low from Nov. 3, 2017, when the volatility gauge closed at 9.14, according to data from FactSet. This occurred at a time when U.S. stocks were drifting consistently higher. The S&P 500 went on to finish 2017 with a gain of more than 20%.
“It’s been a high VIX year, just not as high as some people think it should have been, given volatility elsewhere in markets,” said Rocky Fishman, the head of index volatility research at Goldman Sachs Group Inc.
The VIX has also maintained its strong inverse correlation to the S&P 500, as Callie Cox, a U.S. equity analyst at eToro, pointed out. Data shared by Cox showed that the VIX has moved inversely with the S&P 500
SPX,
+1.75%
roughly 80% of the time since its inception in 1990.Why so low?
So, why has the VIX been so subdued? Cox, Kirsch and others rattled off several factors that might be contributing to its malaise.
One popular explanation is that as institutional investors dumped stocks and shifted more of their portfolios to cash this year, they were left with smaller levels of long-equity exposure in need of hedging.
“VIX is basically a measure of demand for hedges by the biggest investors in the market. But when institutional investors are liquidating their equity positions, they no longer have a need for the associated hedges, so they unwind those positions in the derivatives markets and ultimately that pressures” the VIX, said analysts at Sevens Report Research in a note entitled “Is the VIX broken?” published earlier this month.
Also, a generally bearish outlook for markets means that institutional investors are “fairly well hedged,” Kirsch said, which helps keep a lid on the VIX when large selloffs materialize.
Others cited traders’ increasing reliance on short-term options for tactical trades.
While the VIX is designed to interpret increased options buying as a sign that investors are growing more anxious, it specifically incorporates only options with roughly one month left until expiration.
This has become an issue as trading in shorter-dated options, including contracts with less than one day left until they expire, has surged in popularity this year, according to data from Goldman Sachs.
Trading in zero-day to expiration S&P 500 options has surged in the fourth quarter to more than four times its average level from 2021, according to data shared by Goldman in a research note dated Dec. 15.
“The VIX doesn’t accurately measure fear these days because there’s so much trading in short-dated options,” said Steve Sosnick, chief strategist at Interactive Brokers.
Is a blowup looming?
The question for investors now is whether a subdued VIX might lead to a volatility-inspired reckoning for markets, like what happened in February 2018, when a popular short-volatility trade rapidly unwound, contributing to the death of short-volatility products like the VelocityShares Daily Inverse VIX Short Term ETN.
It’s possible that markets could undergo a volatility-driven “washout” as some of the trades helping to suppress the VIX are unwound, Kirsch said. Although he doesn’t expect the impact on markets to be as severe as it was in 2018 or 2020, he told MarketWatch.
But whatever happens, it’s possible analysts who rely on the VIX to inform their trading might need to adjust their expectations around what constitutes a capitulation signal, Cox told MarketWatch. Still, this doesn’t necessarily mean that the VIX is “broken.”
“It’s still measuring what it’s intended to measure,” she said. “This is more a story of how much the options market has evolved over the past few years.”
“People just aren’t using classic one-month options to hedge or speculate as much. Investors are choosing to get more precise with their options strategies, which makes a lot of sense — it’s cheaper and more adaptable,” Cox added.
-
U.S. stocks close sharply higher in year-end rally after jobless claims data deemed ‘welcome news for the Fed’
U.S. stock indexes finished sharply higher on Thursday, the second-to-last trading session of the year, with the Nasdaq Composite jumping 2.6%, erasing losses from earlier in the week.
The three main indexes built on premarket gains after U.S. weekly jobless claims data showed the number of workers receiving benefits has climbed to the highest level since February, a tentative sign that the Federal Reserve’s interest-rate hikes might be slowing economic growth and inflation.
How stocks traded
-
The S&P 500
SPX,
+1.75%
rose 66.06 points, or 1.8%, to end at 3,849.28. -
Dow Jones Industrial Average
DJIA,
+1.05%
added 345.09 points, or 1.1%, finishing at 33,220.80. -
Nasdaq Composite
COMP,
+2.59%
climbed 264.80 points, or 2.6%, to finish at 10,478.09.
On Wednesday, the Nasdaq Composite dropped 1.4% to 10,213, its lowest closing level of the year. The S&P 500 is up more than 6% from its 2022 low from mid-October, but the large-cap index remains down 19.2% year-to-date, FactSet data show.
What drove markets
The penultimate session of 2022 showed tentative signs of delivering some much needed festive cheer for the stock market as a hope for “Santa Claus rally” had earlier failed to materialize.
MarketWatch Live: Is that you, Santa Claus?
Stocks advanced on Thursday as data showed the number of Americans receiving more than a single week of unemployment benefits had climbed by 41,000 last week to 1.71 million, the highest level in 10 months.
The jobless-claims data “points to a loosening in the labor market, which is welcome news for the Fed,” said Larry Adam, chief investment officer at Raymond James, in a tweet.
However, analysts at Citi still think the claims data indicates a still-very-tight labor markets compared to historical levels.
“While both initial and continuing claims increased this week, they remain within the levels of late 2019,” wrote Gisela Hoxha, U.S. economics research analyst at Citi. “Anecdotes of company layoffs have increased in recent months, particularly in the tech sector. While it could be hard to disentangle the seasonal effects from the announced layoffs, in our view there is no significant evidence of them showing up in the claims data yet.”
Some of those layoffs could be taking effect a couple months later as employees might be kept on payroll for some time after the announcement, which will become significant signs of weakness in the labor market in 2023, Hoxha added.
Stocks were on track to finish what’s set to be the worst year since 2008 not far from 2022 lows. The S&P 500’s 52-week closing low at 3,577.03 was hit on Oct. 12.
Still, the three indexes managed to erase losses from earlier in the week on Thursday. Nasdaq Composite was down 0.2% this week, while the S&P 500 gained 0.1% and the Dow was nearly flat as of Thursday’s close. If the S&P 500 can hold on to weekly gains through Friday, it would mark the end of a three-week losing streak that has been the index’s longest since September, FactSet data show.
Companies in focus
-
Tesla Inc.
TSLA,
+8.08%
shares finished 8.1% higher on Thursday after posting its first rise in eight sessions Wednesday. The electric-vehicle maker’s shares had declined in seven consecutive sessions, their worst losing streak since a seven-session run that ended on Sept. 15, 2018. -
Southwest Airlines
LUV,
+3.70%
remains in focus as the airline tries to recover from logistical issues that caused thousands of flight cancellations over the past week. The stock fell 11% over the past two days, but rose 3.7% in Thursday session. -
General Electric’s
GE,
+2.17%
spinoff of GE HealthCare Technologies will join the S&P 500 index when it begins trading as a separate public company on Jan. 4. GE HealthCare will replace Vornado Realty Trust
VNO,
+1.63% ,
which will move to the S&P MidCap 400. Vornado will replace logistics company RXO
RXO,
+8.39% ,
which will move to the S&P SmallCap 600. GE HealthCare — trading on a when-issued basis — rose 0.9%, while Vornado gained 1.6% and RXO jumped 8.4%. -
Cal-Maine
CALM,
-14.50%
shares ended 14.5% lower after its quarterly earnings came in below Wall Street forecasts. Cal-Maine reported record sales for the quarter as an avian flu outbreak continued to limit the supply of eggs, driving prices sharply higher. The company also said there were no positive tests for avian flu at any of its production facilities, as of Wednesday.
— Jamie Chisholm contributed to this article
-
The S&P 500
-
‘Five days that killed the year’: These trading sessions accounted for 95% of the S&P 500’s losses in 2022
Just five trading sessions accounted for more than 95% of S&P 500 index losses in 2022, according to an analysis by Datatrek co-founder Nicholas Colas in a note published Wednesday, as stocks headed for their worst year since 2008.
He described them in the note as the “five days that killed the year”: Two were caused by disappointing inflation data, while the others were triggered by weak corporate earnings and commentary from Federal Reserve Chairman Jerome Powell.
September 13 (-4.3%)
On the worst day for stocks since 2020, the release of the August U.S. consumer price index report sent traders into a panic when the data showed annual headline and core inflation running hotter than expected.
The headline number came in at 8.3% for the 12 months through August, while core inflation — which strips out volatile food and energy prices — accelerated at 6.3%.
Economists and analysts were particularly rattled by the monthly core inflation number, which came in at 0.6%, double the expected rate of 0.3%, stoking concerns about stubbornly high housing costs as energy prices began to decline after earlier being the biggest driver of this year’s inflation.
May 18th (-4.0%).
Retail giant Target Corp.
TGT,
+0.04%
missed first quarter earnings expectations by a wide margin, elevating worries about the U.S. consumer’s ability to cope with inflation into a full-blown panic one day after Walmart Inc.
WMT,
-1.64%
highlighted similar concerns.Adding to the pressure on the market, during an event hosted by the Wall Street Journal Powell acknowledged that “there could be some pain involved” as the FOMC raised interest rates.
June 13 (-3.9%)
This day’s punishing selloff was also triggered by the release of CPI data, as the numbers for the month of May came in higher than expectations. The S&P 500 finished the session in bear-market territory for the first time in 2022, down 21.8% from the record highs reached in early January.
April 29 (-3.6%)
The market’s decline on this day was also triggered by a corporate earnings disappointment. However, this time, the focus was on e-commerce, and the ripple effects sent many of the megacap technology stocks reeling.
Amazon.com Inc.
AMZN,
-1.16%
— which like both Target and Walmart is a member of the consumer discretionary sector of the S&P 500 — missed earnings expectations for the first quarter while reducing its guidance. The stock ended the day down 14%, its biggest single-session decline since 2006. Apple Inc.
AAPL,
-2.94% ,
Microsoft Corp.
MSFT,
-0.68%
and Google owner Alphabet Inc.
GOOGL,
-1.48%
were also down sharply.May 5 (-3.6%)
Markets tumbled one day after Powell assured investors during a post-meeting press conference that the Fed wasn’t considering interest-rate hikes of greater than 50 basis points. Of course, this statement didn’t age well, as the central bank went on to hike interest rates by 75 basis points at the following four consecutive meetings.
According to Colas, investors can glean some helpful insights about the root causes of this year’s market misery from these five sessions.
To wit, investors had clearly realized by the spring that stubbornly high inflation would force the Fed to raise its benchmark interest rate more aggressively than it was letting on. Also, inflated expectations for corporate earnings helped contribute to the pain as U.S. consumer spending waned.
U.S. stocks sold off far more often than they traded higher this year, a deviation from the historic pattern since World War II whereby stocks typically climb far more often than they fall. Through Tuesday’s session, the index fell during 141 trading days (including Tuesday), while finishing higher during 107 up days.
The S&P 500 was on track to finish 2022 down more than 20% as of midday on Wednesday as all three of the main indexes were trading in the red, with the S&P 500
SPX,
-1.03% ,
Nasdaq Composite
COMP,
-1.20%
and Dow Jones Industrial Average
DJIA,
-0.88%
adding to their losses with just two more trading days left in the year. -
Asian shares rise in thin holiday trading, with U.S., European markets closed
BANGKOK (AP) — Shares rose Monday in Asia in thin post-Christmas holiday trading, with markets in Hong Kong, Sydney and several other places closed.
Tokyo’s Nikkei 225 index
NIK,
+0.65%
gained 0.6% to 26,393.32 and the Kospi
180721,
+0.15%
in Seoul added 0.2% to 2,318.54. The Shanghai Composite index
SHCOMP,
+0.65%
rose 0.5% to 3,061.93 and the SET
SET,
+0.47%
in Bangkok added 0.6%.Bank of Japan Gov. Haruhiko Kuroda indicated in a widely watched speech Monday that the central bank does not intend to alter its longstanding policy of monetary easing to cope with pressures from inflation on the world’s third-largest economy.
Last week, markets were jolted by a slight adjustment in the target range for the yield of long-term Japanese government bonds, viewing it as a sign the Bank of Japan might finally unwind its massive support for the economy through ultra-low interest rates and purchases of bonds and other assets.
A widening gap between interest rates in Japan and other countries has pulled the Japanese yen sharply lower against the U.S. dollar and other currencies and accentuated the impact of higher costs for many imported products and commodities.
But the BOJ has kept its key lending rate at minus 0.1%, cautious over risks of recession.
Kuroda told the Keidanren, the country’s most powerful business group, that with economies facing likely downward pressure, and with Japan’s economy not fully recovered from the impacts of the pandemic, the BOJ “deems it necessary to conduct monetary easing and thereby firmly support the economy. …”
On Friday, the S&P 500
SPX,
+0.59%
reversed a 0.7% loss to close 0.6% higher, at 3,844.82. With one week left of trading in 2022, the benchmark index is down 19.3% for the year. The Dow Jones Industrial Average
DJIA,
+0.53%
rose 0.5% to 33,203.93, while the tech-heavy Nasdaq
COMP,
+0.21%
edged 0.2% higher, to 10,497.86.Small company stocks also rose. The Russell 2000 index
RUT,
+0.39%
picked up 0.4% to 1,760.93.Mixed economic news weighed on stocks early on, but the indexes rebounded by late afternoon amid relatively light trading ahead of the long holiday weekend. U.S. and European markets will be closed Monday.
Markets are in a tricky situation where relatively solid consumer spending and a strong employment market reduce the risk of a recession but also raise the threat of higher interest rates from the Federal Reserve as it presses its campaign to crush inflation.
The government reported Friday that a key measure of inflation is continuing to slow, though the inflation gauge in the consumer spending report was still far higher than anyone wants to see. Also, growth in consumer spending weakened last month by more than expected, but incomes were a bit stronger than expected.
Last week’s reports were the last big U.S. economic updates of the year. Investors will soon turn their focus to the next round of corporate earnings.
The Fed has said it will keep raising interest rates to tame inflation, even though the pace of price increases has continued to ease. The Fed’s key overnight rate is at its highest level in 15 years, after beginning the year at a record low of roughly zero.
The key lending rate, the federal funds rate, stands at a range of 4.25% to 4.5%, and Fed policymakers have forecast that the rate will reach a range of 5% to 5.25% by the end of 2023.
Given the persistence of high inflation, “many are starting to believe the main story is that there will be no scope for Fed cuts in the year ahead and that central banks will maintain these relatively high rates until underlying inflation is truly cracked — and that process will take time,” Stephen Innes of SPI Asset Management said in a commentary.
The Fed’s forecast doesn’t call for a rate cut before 2024, and the higher rates have raised concerns the economy could stall and slip into a recession in 2023. High rates have also been weighing heavily on prices for stocks and other investments.
In currency dealings, the U.S. dollar
DXY,
-0.10%
slipped to 132.62 Japanese yen from 132.82 yen late Friday. The euro rose to $1.0629 from $1.0614. -
Equity funds suffer largest ever weekly outflows: BofA Global
Investors withdrew billions of dollars from equity funds at a record pace in the days after the Federal Reserve, the Bank of England and European Central bank raised interest rates in mid-December and reiterated their commitment to lowering inflation, fueling fears of an economic downturn.
Stock funds recorded the biggest ever weekly outflows of $41.9 billion in the week to December 21, with $27.8 billion of which being withdrawn from exchanged traded funds and $14.1 billion from mutual funds, according to analysts at BofA Global Research, citing EPFR Global data in a weekly note.
BofA analysts led by Michael Hartnett, chief investment strategist, attributed the sell-off to “tax loss harvesting,” a strategy that includes deliberately selling an investment at a loss in order to use that loss to offset taxes owed on investment gains.
Meanwhile, passive equity funds saw total outflows of $27.8 billion in the week to Wednesday, while U.S. value funds recorded a weekly outflow of $17.2 billion (see chart below). Both were the biggest sell-off on record.
SOURCE: BOFA GLOBAL INVESTMENT STRATEGY, BLOOMBERG
The BofA’s Bull & Bear Indicator dipped to 3.0 from 3.1 last week, driven by the first bond fund outflows in three weeks. Bond funds recorded net outflows of $10 billion.
For the year however, BofA said equity funds saw total inflows of $166.5 billion. In contrast, bond funds recorded outflows of $257.1 billion.
U.S. stock indexes have fallen since Wednesday last week when the Federal Reserve raised its benchmark interest rate at a slower pace to a range of 4.25% to 4.50%, but projected a higher-than-expected terminal rate in 2023.
Not long after the decision, central banks in Europe followed the Federal Reserve in slowing the pace of interest rate increases. Both the European Central Bank and Bank of England hiked their key lending rates by 50 basis points and policy makers at the ECB emphasized that market participants should prepare for a series of rate increases to come.
Earlier this week also, the Bank of Japan (BoJ) stunned markets with an unexpected change to its controversial yield curve control policy. The BoJ, an outlier among major central banks for having maintained rates at the zero lower bound, doubled the cap on the country’s 10-year bond yield
TMBMKJP-10Y,
0.383%
from 0.25% to 0.5%, whacking equities in the region and triggering big swings in the U.S. stock market.Strategists at BofA said they are bullish on commodities instead of credit, and preferred “rest of the world” stocks over U.S. stocks, while favoring small-cap over large-cap.
Sector wise, they preferred value over growth stocks, and industrials and banks over technology and private equity.
See: A stock market indicator with one of the best track records has rare good news for investors
U.S. stocks ended the week mostly lower on Friday. The Dow Jones Industrial Average
DJIA,
+0.53%
booked a weekly gain of 0.9%, while the Nasdaq Composite
COMP,
+0.21%
shed nearly 2% and the S&P 500
SPX,
+0.59%
was down 0.2% for the week, according to Dow Jones Market Data. -
Stocks end with steep losses but off session lows
Stocks fell sharply Thursday, but ended well off session lows, as resilient economic data reinforced expectations for the Federal Reserve to continue tightening monetary policy aggressively into 2023. The Dow Jones Industrial Average
DJIA,
-1.05%
finished with a loss of nearly 350 points, or 1%, after dropping more than 800 points at its session low. The S&P 500
SPX,
-1.45%
ended 1.4% lower, while the Nasdaq Composite
COMP,
-2.18%
shed 2.2%. -
U.S. stocks log biggest jump in almost 2 weeks on strong earnings, consumer sentiment
U.S. stocks cemented their biggest daily advance in almost two weeks on Wednesday as investors reacted to optimistic earnings from Nike Inc. and FedEx Corp., along with a surprisingly strong reading on consumer confidence. The S&P 500
SPX,
+1.49%
gained 56.82 points, or 1.5%, to finish at 3,878.44, according to Dow Jones Market Data. The Nasdaq Composite
COMP,
+1.54%
advanced 162.26 points, or 1.5%, to close at 10,709.37. The Dow Jones Industrial Average
DJIA,
+1.60%
gained 526.74 points, or 1.6%, to finish at 33,376.48. -
Dow, S&P 500 post modest gains Tuesday, stocks bounce after 4-session skid
U.S. stocks posted modest gains on Tuesday, climbing a day after the Dow and S&P 500 cemented a fourth day in a row of declines and stocks slumped to their lowest levels in about a month. The Dow Jones Industrial Average
DJIA,
+0.28%
rose about 92 points Tuesday, or 0.3%, ending near 32,850. The S&P 500 index
SPX,
+0.10%
gained 0.1% and the Nasdaq Composite Index
COMP,
+0.01%
closed virtually flat, according to FactSet. Stocks struggled for direction earlier in the session after the Bank of Japan surprised global markets by loosening a cap on 10-year government bond yields, a potential sign of a shift away from its ultraloose monetary policies. Global bond yields jumped along with Japanese government rates. U.S. stocks rallied modestly in afternoon trade, with the S&P 500 led higher by gains in the energy, communication services and materials sectors. -
U.S. stocks finish lower, extending last week’s losses
U.S. stocks ended down Monday, with the technology-heavy Nasdaq Composite falling sharply, deepening last week’s losses as concerns over an economic slowdown persisted. The Dow Jones Industrial Average
DJIA,
-0.49%
closed 0.5% lower, while the S&P 500
SPX,
-0.90%
dropped 0.9% and the Nasdaq Composite
COMP,
-1.49%
sank 1.5%, according to preliminary data from FactSet. All three major benchmarks fell last week amid recession fears, booking back-to-back weekly declines for the first time since September. On Monday, the National Association of Home Builders said its monthly confidence index fell in December for a 12th straight month, dragged down by high mortgage rates and inflation. -
Tesla’s Elon Musk Has a Finance Lesson For Investors. They Disagree.
There is little time off for investors following
Tesla
these days. The weekend before Christmas is no exception. In the past couple of days, there have been more tweets about
Tesla
‘s management. Investors have also learned where
Tesla
might put its next manufacturing plant. And Elon Musk has a finance lesson for investors.“Securities Analysis 101,” tweeted out the Tesla (ticker: TSLA) CEO on Saturday. “As the ‘risk-free’ real rate of return from Treasury Bills approaches the much riskier rate of return from stocks, the value of stocks drop. For example, if T-bills and stocks both had a 10% rate of return, everyone would just buy the former.”
-
The Fed Is Making a Mistake—and the Stock Market Will Pay the Price
We all make mistakes—but the Federal Reserve may be making a bigger one than most. That could mean another difficult year for the stock market in 2023.
Those concerns were front and center this past week, following the Federal Open Market Committee’s December meeting. The Fed didn’t do anything to surprise the market as it raised the federal-funds rate by a half-point, just as everyone expected, and suggested a terminal rate of just over 5%, a level investors had slowly come around to. But the dot plot reflected the Fed’s belief that rates would have to go high and stay high, while Chairman Jerome Powell continued to strike a hawkish tone.
-
Dow, S&P 500 end lower Friday, posting second week of declines
U.S. stocks closed lower for a third session in a row Friday, but avoided the session’s lows, as investors feared higher Federal Reserve rates could tip the economy into a recession. The Dow Jones Industrial Average
DJIA,
-0.85%
shed about 282 points, or 0.9%, ending near 32,920, but well above the session’s low of 32,654.59, according to FactSet. The S&P 500 index
SPX,
-1.11%
shed 1.1%, while the Nasdaq Composite Index
COMP,
-0.97%
fell 1%. For the week, the Dow ended down 1.7%, the S&P 500 shed 2.1% and the Nasdaq fell 2.7%, with all three booking back-to-back weekly losses for the first time in about three months, according to Dow Jones Market Data. The Fed raised rates another 50 basis points on Wednesday, while indicating its policy rate could top 5% and stay there next year. -
Stocks could face another explosion of volatility Friday as $4 trillion of options expire in ‘quadruple witching’
Stocks have been on a wild ride this week, and conditions could still get weirder as traders brace for “quadruple witching” on Friday, when a flurry of equity options and futures contracts expire.
In particular, options contracts tied to $4 trillion in stocks, stock-index futures and exchange-traded funds are set to expire, making Friday potentially the busiest day for options traders this year, according to data compiled by Rocky Fishman, the head of index volatility research at Goldman Sachs.
The…
