U.S. stocks drop on recession fears, Nasdaq closes at new bear market low

  • Tesla gains 3.3% in choppy trade
  • Southwest Airlines slips 5.2% on government review
  • Indices down: Dow 1.1%, S&P 500 1.20%, Nasdaq 1.35%

Dec 28 (Reuters) – Major Wall Street indexes weakened on Wednesday, with the Nasdaq hitting a 2022 closing low, as investors grappled with mixed economic data, a rise in COVID cases in China and… geopolitical tensions as 2023 approaches.

The Nasdaq Composite (.IXIC) ended at 10,213.288, the lowest since the bear market began in November 2021 after the index hit an all-time high. The last time the Nasdaq finished lower was in July 2020. Its previous closing low for 2022 was 10,321.388 on October 14.

“There was no Santa Claus rally this year. The Grinch introduced himself in December to investors,” said Greg Bassuk, managing director of AXS Investments in Port Chester, New York.

December is generally a strong month for equities, with a rally in the week after Christmas. The S&P 500 Index (.SPX) only posted Dec. 18 with losses since 1950, according to data from Truist Advisory Services.

“Normally a Santa Claus rally is triggered by the hope of factors that will drive economic and market growth,” Bassuk said. “The negative and mixed economic data, heightened concerns over the re-emergence of COVID and ongoing geopolitical tensions and … all of this also reflecting Fed policy is preventing Santa (from) showing up at the end of this year.”

All 11 of the S&P 500 (.SPX) sector indices fell on Wednesday. Energy values (.SPNY) were the biggest losers, falling more than 2.2% as demand concerns in China weighed on oil prices.

Investors weighed China’s decision to reopen its COVID-battered economy as infections surged.

“With this current combination of rising cases with an opening of Chinese restrictions, we see investors fearing the ramifications will spread across many different industries and sectors, as was the case during the previous COVID period,” said Bassuk.

The benchmark S&P 500 index (.SPX) is down 20% year-to-date, on track for its biggest annual loss since the 2008 financial crisis. The rout was more severe for the Nasdaq Composite (.IXIC)which closed at the lowest level since July 2020.

While recent data indicating easing inflationary pressures boosted hopes of lower interest rate hikes by the Federal Reserve, a tight labor market and resilient U.S. economy raised concerns that rates could remain higher for longer.

Markets are now pricing in a 69% chance of a 25 basis point rate hike at the US central bank’s February meeting and see rates peak at 4.94% in the first half of next year . .

Tesla Inc stock (TSLA.O) gained 3.3% in choppy trade, a day after hitting the lowest level in more than two years. The stock is down almost 69% for the year.

South West Airline (LUV.N) fell 5.2% a day after the carrier came under fire from the US government for canceling thousands of flights.

Apple Inc. (AAPL.O)Alphabet Inc. (GOOGL.O) and Amazon.com Inc. (AMZN.O) fell between 1.5% and 3.1% as the 10-year US Treasury yield recovered from a brief dip to rise for a third consecutive session.

The Dow Jones Industrial Average (.DJI) fell 365.85 points, or 1.1%, to 32,875.71; the S&P 500 (.SPX) lost 46.03 points, or 1.20%, to 3,783.22; and the Nasdaq Composite (.IXIC) fell 139.94 points, or 1.35%, to 10,213.29.

Falling issues outnumbered advances on the NYSE by a ratio of 3.77 to 1; on the Nasdaq, a ratio of 1.97 to 1 favored the decliners.

The S&P 500 posted seven new 52-week highs and seven new lows; the Nasdaq Composite recorded 75 new highs and 421 new lows.

Volume on U.S. exchanges was 8.59 billion shares, compared to an average of 11.3 billion for the full session over the past 20 trading days.

Reporting by Echo Wang in New York; Additional reporting by Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Sriraj Kalluvila, Anil D’Silva and Richard Chang

Our standards: The Thomson Reuters Trust Principles.

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