Wall Street falls as growth stocks drag down the S&P 500 and Nasdaq

  • Tesla collapses on production reduction plan
  • Southwest Airlines falls into holiday flight cancellations
  • China ADRs rise on reopening optimism
  • Mixed Indices: Dow up 0.21%, S&P down 0.36%, Nasdaq down 1.22%

NEW YORK, Dec 27 (Reuters) – Wall Street was trading mostly lower at the start of a holiday-shortened week on Tuesday as investors weighed the likelihood of prolonged Fed tightening against China’s easing of their strict zero-COVID rules.

Interest Rate Sensitive Growth Stocks (.IGX) weighed more, dragging the tech-laden Nasdaq to the max. The S&P 500 joined the Nasdaq in negative territory, while the Dow, driven by value stocks (.IVX)it was modestly green.

“On down days, stock tends to do well relative to growth,” said Tim Ghriskey, a senior portfolio strategist at Ingalls & Snyder in New York.

“Not a lot of news, low volume, the China problem is there, the normalization of a post-COVID environment,” Ghriskey added.

Tesla Inc Stock (TSLA.O) It fell 8.3% after a Reuters review of an internal schedule revealed that the electric vehicle maker plans to cut production at its Shanghai plant.

With Tuesday’s move, Tesla shares have lost nearly 68% of their value this year.

Rising Treasury yields put interest rate-sensitive growth stocks under pressure, a recurring theme in 2022. Over the year, growth stocks have plunged more than 30% compared to the decline in value of about 7.5% during the same period.

With just four trading days left in 2022, all three indices are on track to post their biggest annual loss since 2008, the nadir of the global financial crisis.

“(This year) it was about the Fed raising rates, maybe belatedly,” Ghriskey said. The aggressiveness to lower inflation to the 2% level has shocked the market and investors.

Beijing eased its strict COVID-19 restrictions, which have battered the $17 trillion economy, fueling hopes of a revival in global demand and an improved supply chain.

On the economic front, the Commerce Department’s initial assessment of the US merchandise trade balance showed the deficit narrowing by 15.6%, while S&P Case-Shiller showed commodity price growth Housing in its 20-city composite cooled to 8.6% year-over-year, the lowest reading since November 2020.

The Dow Jones Industrial Average (.DJI) rose 68.31 points, or 0.21%, to 33,272.24, the S&P 500 (.SPX) lost 13.95 points, or 0.36%, to 3,830.87 and the Nasdaq Composite (.IXIC) it fell 128.05 points, or 1.22%, to 10,369.81.

Of the top 11 S&P 500 sectors, consumer discretionary (.SPLRCD) and communication services (.SPLRCL) suffered the largest percentage loss.

energy shares (.SPNY) were the biggest gainers, advancing 1.2% as crude prices rose on an expected surge in demand due to China’s eased COVID restrictions.

US-listed shares of Chinese companies including JD.Com Inc, Alibaba Group Holding Ltd and Pinduoduo Inc. (PDD.O) it gained between 2% and 4.2% after Beijing announced it was easing travel restrictions.

Southwest Airlines Co. (LUV.N) it fell 5.5% after bad weather forced the commercial discount airline to lead its peers in cancellations. The Broader S&P 1500 Airlines Index (.SPCOMAIR) it was down 2.4%.

Issues going down outnumbered going up on the New York Stock Exchange by a ratio of 1.32 to 1; on Nasdaq, a 1.86-to-1 ratio favored decliners.

The S&P 500 posted 7 new 52-week highs and 3 new lows; the Nasdaq Composite posted 74 new highs and 377 new lows.

Reporting by Stephen Culp in New York Additional reporting by Amruta Khandekar and Ankika Biswas in Bengaluru Editing by Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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