Wall Street closes lower for third day in a row as recession concerns mount

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

NEW YORK, Dec 16 (Reuters) – U.S. stocks fell for a third straight session and suffered a second straight week of losses on Friday as fears continued to mount that the Federal Reserve’s campaign to curb inflation would lead to the economy to a recession.

Stocks have faltered since the US central bank’s decision to raise interest rates by 50 basis points (bp), as expected. But comments from Fed Chairman Jerome Powell signaled further policy tightening, with the central bank projecting interest rates to top the 5% mark in 2023, a level not seen since 2007.

Other comments from other Fed officials fueled the concern. New York Fed President John Williams said on Friday that it remains possible for the US central bank to hike rates more than it expects next year. The policymaker added that he does not anticipate a recession due to the Fed’s aggressive tightening.

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

“It looks as if the market is finally starting to understand that bad news is bad news, and that is what is starting to happen. Since bottoming out in October, the market has continued to price in what I would consider a substantial amount of optimism. on the fact that the Fed was able to navigate and pilot a successful soft landing,” said Dave Wagner, equity analyst and portfolio manager at Aptus Capital Advisors in Cincinnati.

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

The Dow Jones Industrial Average (.DJI) it fell 281.76 points, or 0.85%, to 32,920.46; the S&P 500 (.SPX) it lost 43.39 points, or 1.11%, to 3,852.36; and the Nasdaq Composite (.IXIC) it 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 declined 2.72%.

Money market bets show at least two 25bp rate hikes next year and a terminal rate of around 4.8% by mid-year, before falling to around 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 two and a half years, even as demand declined. 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 for a “Santa rebound,” or year-end rally, in markets this year have dimmed as most global central banks have tightened. The Bank of England and the European Central Bank were the latest to signal an extended rate hike cycle on Thursday.

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However, markets pared 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 witchcraft, which can exacerbate market volatility. .

Each of the 11 major S&P 500 sector indices were in the red, led lower by a more than 2.96% drop in real estate stocks. (.SPLRCR).

Meta Platforms Inc (META.O) rose 2.82% after JP Morgan upgraded the stock to “overweight” from “neutral,” while Adobe Inc. (ADBE.O) It gained 2.99% after the Photoshop maker forecast first-quarter earnings above expectations.

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

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

Issues going down outnumbered going up on the New York Stock Exchange by a ratio of 2.47 to 1; on Nasdaq, a 1.66-to-1 ratio favored decliners.

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

Reporting by Chuck Mikolajczak; Edited by Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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