Wall Street ends lower for a third straight day as recession concerns mount

  • US business activity slumps in December
  • Meta jumps on JP Morgan rating upgrade
  • Adobe climbs on optimistic profit forecast
  • Dow down 0.85%, S&P 500 down 1.11%, Nasdaq down 0.97%

NEW YORK, Dec. 16 (Reuters) – US stocks fell for a third consecutive session and suffered a second straight week of losses on Friday as fears continued to mount that the Federal Reserve’s campaign to halt inflation could push the economy into recession would end up.

Equities have been diversified since the US Federal Reserve’s decision to raise interest rates by 50 basis points (bps) as expected. But comments from Fed Chairman Jerome Powell signaled more policy tightening, and the central bank predicted interest rates would cross the 5% mark in 2023, a level not seen since 2007.

Further comments from other Fed officials fueled concerns. New York Fed President John Williams said on Friday that it remains possible that the Federal Reserve will raise interest rates more than it expects next year. The policymaker added that he does not expect a recession as a result of the Fed’s aggressive tightening.

In addition, Mary Daly, president of the San Francisco Federal Reserve Bank, said it is “reasonable” to believe that once the Fed’s policy rates peak, they can stay there until 2024.

“It feels like the market is finally starting to understand that bad news is bad news, and that’s what’s starting to happen. Since the October lows, the market has continued to price in what I would consider a significant amount of optimism on this moment. the fact that the Fed was able to navigate and execute a successful soft landing,” said Dave Wagner, equity analyst and portfolio manager for Cincinnati-based Aptus Capital Advisors.

“Finally, the market takes into account that bad news should mean bad things for the market.”

The Dow Jones Industrial Average (.DJI) fell 281.76 points, or 0.85%, to 32,920.46; the S&P 500 (.SPX) lost 43.39 points, or 1.11%, to 3,852.36; and the Nasdaq Composite (.IXIC) fell 105.11 points, or 0.97%, to 10,705.41.

For the week, the Dow lost 1.66%, the S&P fell 2.09% and the Nasdaq fell 2.72%.

Money market bets show at least two rate hikes of 25 basis points next year and a closing rate of about 4.8% by the middle of the year before falling to about 4.4% by the end of 2023.

On the economic front, a report showed that US business activity contracted further in December as new orders fell to their lowest level in just over 2½ years, though slowing demand helped cool inflation.

The tech-heavy Nasdaq closed below its 50-day moving average on Thursday, a key technical level seen as a sign of momentum. On Friday, the S&P also closed below its 50-day moving average.

Prospects of a “Santa Claus rally,” or year-end rebound, in markets this year have faded as the majority of global central banks have adopted tightening policies. The Bank of England and the European Central Bank were the most recent on Thursday to signal an extended cycle of rate hikes.

Reuters Graphic Reuters Graphic

Markets offset losses in the last hour of trading, possibly due in part to the simultaneous expiration of stock options, stock index futures and index option contracts, known as triple witching, which can exacerbate market volatility.

Each of the 11 major S&P 500 sector indices was in the red, lowered by a fall of more than 2.96% in real estate stocks (.SPLRCR).

Meta Platforms Inc (META.O) rose 2.82% after JP Morgan upgraded the stock from “neutral” to “overweight”, while Adobe Inc (ADBE.O) gained 2.99% after the maker of Photoshop posted a profit for better than expected in the first quarter.

Exact Sciences Corp (EXAS.O) rose 16.39% after competitor Guardant Health Inc’s (GH.O) cancer test fell short of expectations, while General Motors Co (GM.N) lost 3.91% after its robotaxi Cruise unit faced a safety investigation by US auto safety regulators.

Volume on the US exchanges was 17.28 billion shares, compared to the average of x.xx billion for the full session over the past 20 trading days.

Falling issues outnumbered emerging issues on the NYSE by a ratio of 2.47 to 1; on Nasdaq, a ratio of 1.66 to 1 favored the fallers.

The S&P 500 posted a new 52-week high and 18 new lows; the Nasdaq Composite recorded 79 new highs and 392 new lows.

Reporting by Chuck Mikolajczak; edited by Jonathan Oatis

Our Standards: The Thomson Reuters Principles of Trust.