Thursday, 29 December 2022 / Published in Equities & Indices

As we head into the final trading days of 2022, the major U.S. stock indices closed lower by more than 1% on Wednesday following a broad selloff amid recession fear and hawkish Federal Reserve, and they are on track for their worst year since 2008.

Growing worries for an economic recession, record-high inflation, energy crisis, Ukraine war, Covid concerns in China, a stronger dollar, surging interest rates, and borrowing costs amid the hawkish central banks have removed the risk appetite from the market recently, pushing tech-heavy Nasdaq Composite down by 35% so far in the year, while the S&P 500 and Dow Jones are on track to lose 20.6% and 10% respectively.

Market reaction:

The Dow Jones index extended recent losses by 1.1% to 32,875, settling below the 33,000 key support level, heavily affected by losses in the largest market cap stock of Apple, on energies, and industrials.

The share of Apple, a bellwether for the overall market and a major influence on investor sentiment, led the broad sell-off, falling more than 3% to $126, posting a new 52-week low for a second day as iPhone supply disruption jitters persist amid labor shortages at Foxconn’s main production facility in Zhengzhou, China.

At the same time, the projections on iPhone shipments for 2022 and the first quarter of 2023 would be lower than previous estimates, deteriorating the revenue outlook for 2023.

The S&P 500 index fell 1.2% to 3,783, affected by significant losses in the energy sector as oil and natural gas prices slid, coupled with losses in airline and tourist sectors as the severe winter weather conditions canceled many flights and traveling during the busy-Christmas period.

Following the ongoing sell-off in tech and growth companies, tech-heavy Nasdaq Composite settled down by 1,5% yesterday, ahead of its worst year since 2008.

Nasdaq has lost nearly 35% so far this year as investors rotated out of rate-sensitive growth and tech stocks amid rising recession fears and surging interest rates.

Crude oil:

Both Brent and WTI crude oil prices fell further on Thursday morning, having lost more than 5% since topping on Tuesday on growing concerns that the surging Covid-19 cases in China could halt a recovery in petroleum demand growth for the world’s second-largest oil consumer.

Brent fell as low as $82/b on Thursday morning retreating from its monthly highs of $86/b hit on Tuesday, while U.S.-based WTI crude dropped to near $77/b, -2% so far on the day.