Stocks close lower on Wall Street; Southwest losses mount
BANGKOK — A broad slide for stocks added to Wall Street’s recent losses Wednesday, as investors count 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 on the benchmark index. The tech-heavy Nasdaq composite fell 1.4%. Both indexes entered this week with three consecutive weekly losses.
The Dow Jones Industrial Average fell 1.1%, while Russell 2000 the index of smaller company stocks dropped 1.6%.
With two more days of trading left in 2022, the S&P 500 is headed for a roughly 20% drop for the year, even as profits and margins for companies in the index have hit record heights this year. The Dow is on pace for a 9.5% drop, while the Nasdaq is doing much worse, on pace to plunge 34.7%. The latest losses are not good news for investors who hope for another “Santa Claus” rally. Wall Street uses this term to describe when stocks rise in December’s last five trading days and January’s first two.
“The proverbial ‘Santa Claus’ rally, which since 1950 has statistically returned approximately 1.3-1.8% nearly 80% of the time, has looked as though Santa has taken an early vacation,” said Quincy Krosby, chief global strategist for LPL Financial.
Investors have a quiet, holiday-shortened week. Markets were closed Monday due to the Christmas holiday. There are no major economic reports this week.
A National Association of Realtors report showed that the housing market continued to cool amid high prices and higher interest rates. November saw a 4% drop in pending home sales.
The report weighed down on homebuilders. Toll Brothers fell 2.4 %.
U.S. crude oil prices settled 0.7% lower and natural gas prices plunged 10.8%. This has hurt energy stocks. Exxon Mobil lost 1.6%.
Southwest Airlines lost 5.2% after the airline dealt with the fallout from thousands of flight cancellations. According to the airline’s CEO, it could take until next week before normal flight schedules are restored. Other airlines also saw shares fall. United Airlines dropped 2.4% and Delta Air Lines fell 2.8%.
Tesla saw a 3.3% increase after it recovered from the severe losses it suffered Tuesday following reports that it had temporarily suspended production at a Shanghai factory. The Chinese government announced late Tuesday it would begin issuing new passports. This will be a significant step away from antivirus travel restrictions that will likely bring a flood to China for next month’s Lunar New Year holiday. China has already said it will drop most of its COVID-19 travel restrictions next month.
Hong Kong’s Hang Seng rose 1.6%, while Shanghai Composite index fell 0.3%.
Markets in Europe closed mostly higher.
In the U.S., the S&P 500 fell 46. 03 points to 3,783.22. The Dow dropped 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 yields were mixed. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3. 88% from 3. 85% Tuesday. The yield on the Treasury’s two-year note fell to 4. 34% from 4. 38% late Tuesday.
Wall Street is still on edge and will likely continue to deal with volatile trading as Federal Reserve continues to fight stubbornly hot inflation. To tame inflation, the Fed and other central banks have increased interest rates to curb borrowing and slow spending. However, this strategy could slow down the economy and lead to a recession.
The Fed raised its key interest rates seven times this year. It is expected to keep raising rates in 2023. The federal funds rate, which is the key lending rate, currently stands at 4. 25% to 4.5%, and 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 reduction before 2024..
Elaine Kurtenbach contributed to this report.
I have been writing professionally for over 20 years and have a deep understanding of the psychological and emotional elements that affect people. I’m an experienced ghostwriter and editor, as well as an award-winning author of five novels.