A broad slide in stocks added to Wall Street’s recent losses on Wednesday as investors counted down to the end of the worst year for the S&P 500 since 2008.
The S&P 500 fell 1.2%, with technology, energy and industrial stocks among the biggest weights in the benchmark index. The high-tech Nasdaq Composite fell 1.4%. Both indices came in this week with three consecutive weekly losses.
The Dow Jones industrial average fell 1.1%, while the Russell 2000 index of shares of smaller companies fell 1.6%.
With two more trading days left in 2022, the S&P 500 is poised for a roughly 20% drop for the year, even as earnings and margins for companies in the index hit record levels this year. The Dow is on track for a 9.5% drop, while the Nasdaq is doing much worse, on track for a 34.7% drop.
The most recent losses do not bode well for investors hoping for another “Santa Claus” rally. That’s Wall Street’s term for when stocks rise in the last five business days of December and the first two of January.
“The proverbial ‘Santa Claus’ rally, which since the 1950s has returned statistical results of about 1.3-1.8% nearly 80% of the time, looks like Santa has taken an early vacation,” said Quincy Krosby, Global Chief Strategist at LPL Financial.
Investors are in the midst of a mostly quiet week shortened by the holidays. Markets were closed on Monday for the observed Christmas holidays and no major economic reports are expected this week.
A report from the National Association of Realtors showed that the housing market continued to cool amid higher prices and higher interest rates. Pending home sales fell 4% in November.
The report weighed on homebuilders. Toll Brothers fell 2.4%.
US crude oil prices fell 0.7% and natural gas prices fell 10.8%. That hurt energy stocks. Exxon Mobil fell 1.6%.
Southwest Airlines fell 5.2% as the airline dealt with the fallout after canceling thousands of flight cancellations. The airline’s CEO said it could be next week before the flight schedule returns to normal. Shares of other airlines also fell. Delta Air Lines fell 2.8% and United Airlines fell 2.4%.
Tesla rose 3.3% as it stabilized from heavy losses it suffered after reports on Tuesday that it temporarily halted production at a factory in Shanghai.
The Chinese government announced late Tuesday that it will begin issuing new passports, an important step in moving away from anti-virus travel barriers that are likely to bring a flood of tourists out of China for next month’s Lunar New Year holidays. China has already said it will lift most of its COVID-19 travel restrictions next month.
Hong Kong’s Hang Seng rose 1.6%, while the Shanghai Composite Index fell 0.3%.
Markets in Europe closed mostly lower.
In the US, the S&P 500 fell 46.03 points to 3,783.22. The Dow fell 365.85 points to close at 32,875.71. The Nasdaq slid 139.94 points to 10,213.29. The Russell 2000 gave up 27.49 points to finish at 1,722.02.
Bond returns were mixed. The 10-year Treasury yield, which influences mortgage rates, rose to 3.88% from 3.85% on Tuesday. The two-year Treasury yield fell to 4.34% from 4.38% late Tuesday.
Wall Street remains on edge and is likely to continue to deal with volatile trading as the Federal Reserve continues its fight against stubbornly high inflation. The Federal Reserve and other central banks have been raising interest rates to stifle lending and cut spending to control inflation. However, the strategy risks slowing the economy down too much and triggering a recession.
The Fed has already raised its key interest rate seven times this year and is expected to continue raising rates in 2023. The key lending rate, the federal funds rate, ranges from 4.25% to 4.5%, and Fed policymakers forecast the rate to reach a range of 5% to 5.25% by the end of 2023. Their forecast calls for no rate cut before 2024.
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Elaine Kurtenbach contributed to this report.
