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U.S. stocks turned lower Wednesday morning, giving up earlier gains, as investors assessed economic data on the housing market amid concerns over rising interest rates.
How stock indexes are trading
-
The Dow Jones Industrial Average
DJIA,
-0.39%
fell almost 54 points, or 0.2%, to around 33,188. -
The S&P 500
SPX,
-0.54%
shed 5 points, or 0.1%, to about 3,824. -
Nasdaq Composite
COMP,
-2.86%
declined 16 points, or 0.2%, to 10,337.
On Tuesday, the Dow rose 38 points, or 0.11%, to 33242, the S&P 500 declined 16 points, or 0.4%, to 3829, and the Nasdaq dropped 145 points, or 1.38%, to 10353.
What’s driving markets
U.S. stocks were trading slightly lower Wednesday morning, giving up modest gains earlier in the session, as investors traded cautiously in the final week of 2022.
Failed rallies are an established feature of bear markets and investors remain wary of applying overly bullish bets as the year draws to a close, especially given the holiday-thinned trading.
“While I appreciate the natural instinct to ‘buy the dip’ in growth now that the year has ended, the simple truth is that the macroeconomic conditions that resulted in growth underperformance in 2022 are still in place,” cautioned Tom Essaye, founder and president of The Sevens Report, in a note Wednesday. “Rates are not falling quickly, are a long way from ‘low” and aren’t getting there anytime soon.”
Indeed, there are few fresh catalysts on Wednesday to distract investors from the underlying theme that has driven markets for much of the year: multi-decade high inflation and how the central banks’ attempts to quash it will hurt the global economy and crimp company earnings.
The Federal Reserve has raised interest rates by 425 basis points since March, and the S&P 500 consequently is down 19.7% for the year through Tuesday. Growth and technology stocks have been particularly hard hit in 2022, with the Nasdaq Composite tumbling 33.8% over the same period.
“Concerns over the well-entrenched 2022 wall of worry list, including Federal Reserve policy, inflation, economic growth, and the prospect of a recession in 2023, are dominating investors’ psyches during the final trading days of the year,” said Stephen Innes, managing partner at SPI Asset Management.
“Investors hoping for a year-end rally are likely disappointed as holiday cheer seems in short supply,” Innes added.
On the economic front, the National Association of Realtors said Wednesday that U.S. pending-home sales fell 4% in November for a sixth straight monthly drop.
“Pending home sales recorded the second-lowest monthly reading in 20 years as interest rates, which climbed at one of the fastest paces on record this year, drastically cut into the number of contract signings to buy a home,” NAR chief economist Lawrence Yun said in the statement. “Falling home sales and construction have hurt broader economic activity.”
Meanwhile, China has been relaxing its COVID-19 restrictions. It’s a strategy deemed positive for the global economy but investors have focused on the inflationary potential of Beijing’s move.
“If the Chinese reopening story is positive for oil and commodity prices – and for the massively battered Chinese stocks, it’s bad news for global inflation,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a morning note.
“The surge in Chinese demand will certainly boost inflation through higher energy and commodity prices,” Ozkardeskaya added. “And in response to higher inflation, the central banks will continue hiking rates.”
Companies in focus
-
Southwest Airlines
LUV,
-2.30%
shares were down 2% as the company continues to cancel flights and tries to return to a normal schedule. Southwest has canceled thousands of flights over the past week, following a severe winter storm, and is limiting bookings over the next few days. -
Tesla
TSLA,
+0.07%
was up more than 3% after shares of the electric-vehicle company tumbled 11.4% in the previous session and closed with a market cap of $344.5 billion, ranking it as the 16th-largest U.S. company. Tesla had ranked 10th on Friday. -
AMC Entertainment
AMC,
-1.99%
shares fell 2.6% down after CEO Adam Aron asked the movie theater chain’s board to freeze his salary and urged other top AMC executives to do the same.
