A man rides his bicycle past a monitor showing Japan’s Nikkei 225 index at a brokerage house in Tokyo on Friday. Asian stock markets followed Wall Street’s gains on Friday on the encouragement of US jobs data, but he was headed for double-digit losses for the year. (Hiroshi Komae, Associated Press)
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NEW YORK — Wall Street capped a quiet day in trading Friday with more losses as it wrapped up its worst year for the S&P 500 since 2008.
The benchmark index ended 2022 with a loss of 19.4%, or 18.1% when dividends are included. It’s the third annual decline since the financial crisis 14 years ago and a painful reversal for investors after the S&P 500 rose nearly 27% in 2021. Overall, the index lost his $8.2 trillion worth, according to the S&P Dow Jones Indices. .
The Nasdaq Composite Index, which has a large component of technology stocks, posted an even bigger loss of 33.1%.
Meanwhile, the Dow Jones Industrial Average is down 8.8% in 2022.
Stocks struggled all year inflation The pressure on consumers is mounting and fears of an economy slipping into recession are growing. Central banks have raised interest rates to combat high prices. The US Federal Reserve (Fed)’s aggressive interest rate hikes are still a big focus for investors. Central banks have drawn a fine line between raising interest rates enough to keep inflation under control and raising them enough to plunge the US economy into recession.
The Fed’s main lending rate will remain in the 0% to 0.25% range in early 2022, ending the year in the 4.25% to 4.5% range after seven hikes. The US Central Bank expects it to reach a range of 5% to 5.25% by the end of 2023. That projection does not call for rate cuts until 2024.
Rising interest rates have prompted investors to sell high-priced shares in tech giants such as Apple and Microsoft, as well as other companies that have thrived as economies recover from the pandemic. Amazon and Netflix lost about 50% of their market value. Facebook’s parent companies Tesla and Meta Platforms each fell more than 60%, their biggest annual losses ever.
Russian invasion of Ukraine Inflationary pressures worsened early in the year as oil, gas and food prices became more volatile amid problems with existing supply chains. Crude oil prices closed around $80 on Friday, about $5 higher than at the beginning of the year. But while oil climbed above $120, energy stocks were the only 11 sectors in the S&P 500 to post gains, up 59%.
China has spent most of this year implementing strict COVID-19 policies, restricting the production of raw materials and goods, but is now in the process of lifting travel and other restrictions. At this time, it is unclear what impact China’s resumption of economic activity will have on the global economy.
But analysts say the Fed’s fight against inflation will remain Wall Street’s top concern in 2023. Investors will continue to seek a better sense of whether inflation is easing fast enough to take the pressure off consumers and the Fed.
Jay Hatfield, CEO of Infrastructure Capital Advisors, says if inflation continues to show signs of easing and the Fed curbs its rate hike campaign, it could pave the way for stocks to recover in 2023. said that there is
“Since last November, the Fed has been overhanging in this market, so I think we’ll be ready for a rally if the Fed pauses and there’s no major recession,” he said. rice field.
Since last November, the Fed has been overhanging this market. So, if the Fed pauses and we don’t get a big recession, we think we’re ready for a rally.
– Jay Hatfield
There was little business or economic news for Wall Street to consider on Friday. In addition to this, a week of shortened holidays set the stage for mostly light trading.
The S&P 500 fell 9.78 points (0.3%) to close at 3,839.50. The index saw him record a 5.9% loss in December.
The Dow fell 73.55 points (0.2%) to close at 33,147.25. The Nasdaq has him down 11.61 points (0.1%) to 10,466.48.
Tesla rose 1.1%, remaining stable after a sharp drop earlier in the week. The electric car maker’s share price will plunge 65% in 2022, wiping out about $700 billion in market value.
Southwest Airlines rose 0.9% as operations returned to relative normalcy after massive cancellations over the holiday period. Shares closed the week down 6.7%.
Small business stocks also fell on Friday. The Russell 2000 closed down 5 points (0.3%) at 1,761.25.
Bond yields generally rose. Yields on 10-year government bonds, which affect mortgage rates, rose to 3.88% from 3.82% late Thursday. Bonds usually do well when stocks crash, but 2022 turned out to be one of the worst years ever for the bond market, thanks to the Fed’s rapid rate hikes and inflation.
Heading into the first week of 2023, we have some important job market updates coming. The job market is a particularly strong sector of the economy and has helped build a bulwark against recessions. That said, strong employment and wages make the Fed’s job more difficult as it may have to remain aggressive to continue its fight against inflation. . The result is an excessive slowdown in the economy, increasing the risk of a recession.
The Fed will release the minutes of its latest policy meeting on Wednesday, which could give investors more insight into its next move.
The government is also due to release its November report on job openings on Wednesday. It will be followed by a weekly update on unemployment on Thursday. The high-profile monthly employment report is due to be released on Friday.
Wall Street is also waiting for the latest corporate earnings reports to start around mid-January. Companies have warned investors that inflation is likely to weigh on profits and earnings in 2023. That’s after spending most of 2022 raising prices on everything from food to clothing to offset inflation, but many companies have gone further and actually padded their profit margins.
Companies in the S&P 500 are expected to see a 3.5% decline in earnings in the fourth quarter, according to FactSet. Analysts expect earnings to remain broadly flat through the first half of 2023.
US stock markets will be closed on Monday in honor of the New Year’s Day holiday.