Daily Market Notes: 12-20-2022

After Fed Chairman Powell put the kibosh on the stock market, the new week began with more losses as one would expect.

As a result, the Dow ended with a closing loss of 163 down to 32,757 hurt by selling in DIS for its worst yearly percentage decline since the 1970’s, HD which had been doing better lately and MSFT which cannot seem to get out of its own way. It had been off by as much as 338 before a last hour rally cut the closing declines helped by gains in BA and CVX.

And as usual on lower days like this, the S&P did worse with a closing loss of 34 down to 3817 and it also was able to improve in the final hour after having been off by 52 at the low.

The Nasdaq continued its losing ways with a 159 point decline down to 10,546 while the Russell 2000 Index of small stocks sagged to another decline, this time of 25 down to 1738.

And once again, the VIX is not helping at all as after another lower day in all of the indices, it had the nerve to DECLINE once again, this time down to 22.42 and this is the worst possible combination as if it cannot go higher on lower days in the market, this then leaves stocks vulnerable to further selling because it does not indicate an oversold situation until it gets into the 30’s.

The latest wave of selling extends the major indexes’ losing streak to a fifth straight day after each index has posted a weekly loss the past two weeks.

Markets have been slumping as hopes for a gentler Federal Reserve vanish amid stubbornly hot inflation. The central bank last week raised its forecast of how long interest rates have to stay elevated to cool inflation and I will repeat the quote that Chair Powell mentioned that basically did things in  – “Reducing inflation will require a sustained period of below trend growth and some softening of labor market conditions. The historical record cautions strongly against prematurely loosening policy and we will stay the course until the job is done.” And how is the market going to get a steady rally under those conditions?

Treasury yields moved up with the 10-year Note up to 3.59% from 3.49% late Friday while the 2-year moved up to 4.27%.

The federal funds rate stands at a range of 4.25% to 4.5%, the highest level in 15 years. Fed policymakers forecast that the rate will reach a range of 5% to 5.25% by the end of 2023. Their forecast does not call for a rate cut before 2024.

This week sees the following earnings: today – GIS lower; tonight – Dow component NKE plus FACT, FDX; Wednesday – CCL, CTAS, MU; Thursday – KMX, PAYX.

Economic reports will have: yesterday  – Home Builders Housing Market Index for December fell for the 12th straight month to 31; today – December housing starts were off by 0.5% while building permits, an indicator of future activity, fell by 11,3%; Wednesday – December Consumer Confidence, November existing home sales; Thursday – weekly jobless claims, final reading for 3Q G.D.P. Friday – November personal income and spending, November new home sales, December U. of Michigan final Consumer Sentiment Survey.

Donald M. Selkin

Chief Market Strategist


Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our current or potential customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analysis concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: {Bloomberg Financial, Reuters, and Associated Press}. It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities, may hold a position, either long, or short, as well as options, bonds or other instruments in the companies mentioned in this report.