The market began the final trading week of 2022 with a negative slant as the Dow got as low as a 134 point decline but was able to lift itself off of those levels to battle back to a 37 point close up to 33,241 after being as high as 183 ahead. The inability to hold those better levels was a function of the Nasdaq being under pressure as the former high-flying technology stocks slumped once again, with TSLA in particular now losing 40% in the past month and a whopping 69% decline for the year. The Dow was led by the usuals, namely CAT, CVX, HON and PG and is having its best quarter since q2 of 2020, for its fourth gain out of the past five sessions.
The S&P sort of got caught between the weak Nasdaq and the Dow which tried to do better and ended with a final loss of 15 down to 3829 which now leaves it 7 points ahead after 2 days of the 7 famous ones in the Santa Claus rally period, so we will see how this goes and whether it determines if 2023 is going to be a better year than this one was, with a decline of around 20%.
The Nasdaq never had chance as it drifted lower all session due to horrible weakness in TSLA and selling in all the other former high tech leaders which have really gotten killed this year. It ended down by 144 to 10, 353 and is now lower by 34% this year. And both this one and the S&P are both coming off three straight weeks lower.
The Russell 2000 Index of small stocks drifted down again with an 11 point decline to 1749 while the VIX rose up to 21.15 as it just drifts in a very narrow range despite all of the recent volatility in both directions.
Airline stocks were broadly lower after a massive winter storm caused widespread delays and forced several carriers to cancel flights over the weekend. The worst one was LUV as it had to cancel roughly two-thirds of its flights over the last couple of days, which it blamed on problems related to staffing and weather. It is a rare stumble for an airline typically known as one of the more reliable carriers both in good times and bad.
And naturally energy stocks did the best after crude oil prices continued to rise to a three-week high at $79 a barrel on our friends the Russians cutting back their production.
Another sad case is that of ARKK which reached a 5-year low with a decline of 70% this year as it continues to go on its “disruptive technology” theme which has not worked out so well as TSLA is one of its largest positions, in addition to ROKU and EXAS.
Treasury yields mostly rose as the 10-year Note moved up to 3.85% from 3.75% late Friday while the 2-year ended at 4.40%.
Uncertainty about how far the Federal Reserve and other central banks will go to fight the highest inflation in decades has kept investors on edge. The Fed raised its key interest rate seven times this year and has signaled more hikes to come in 2023, even though the pace of price increases has been easing.
Chinese-listed stocks did well after Beijing announced it would relax more of its pandemic restrictions despite widespread outbreaks of COVID-19 that are straining its medical systems and disrupting business. China’s National Health Commission said Monday that passengers arriving from abroad will no longer have to observe a quarantine, starting on January 8th but they will still need a negative virus test within 48 hours of their departure and to wear masks on their flights. It was the latest step toward dropping once strict virus control measures that have severely limited travel to and from the world’s second largest economy.
China has joined other countries in treating cases instead of trying to stamp out infections. It has dropped or eased rules on testing, quarantines and movement, trying to reverse an economic slump. But the shift has flooded hospitals with feverish, wheezing patients, and authorities are going door to door and paying people older than 60 to get vaccinated against COVID-19.
This week is light on earnings with : tonight – CALM.
Economic reports will have: yesterday – October CaseShiller Home Price Index rose by 9.2%, Dallas Fed December manufacturing index fell to -18.8 from -14.4; today – November pending home sales fell by 4% for the sixth straight decline, Richmond Fed December Manufacturing Index; Thursday – weekly jobless claims; Friday – December Chicago Business Barometer.
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.