Stocks closed lower Tuesday, giving up earlier gains, as concerns such as rising rates and high inflation that knocked the market down last year continued to trouble investors in the new year.
The S&P 500 fell 0.40% to close at 3,824.14 slipping from highs of the day when December’s manufacturing index declined at the fastest pace since May 2020. The Dow Jones Industrial Average ended the day down 10.88 points, or 0.03%, to 33,136.37 as shares of Boeing offset losses. The Nasdaq Composite shed 0.76% to 10,386.99.
both slipped, weighing on the broader market and carrying forward a main theme from 2022, when the technology sector was hit hard as the Federal Reserve raised rates to fight inflation. Tesla fell 12.24%, hitting its lowest level since August 2020, following disappointing fourth-quarter deliveries. Apple shed 3.74% on reports that it will cut production due to weak demand.
The sentiment may continue in 2023 as the central bank is poised to continue to hike interest rates in the coming months, stoking fears that the U.S. economy may fall into a recession.
“A recessionary environment in 2023 could further hamper tech stock performance in the new year, as investors’ thirst would increase for value oriented companies and those with higher profit margins, more consistent cash flows, and robust dividend yields,” wrote Greg Bassuk, CEO of AXS Investments in New York.
The major averages closed 2022 with their worst annual losses since 2008, snapping a three-year win streak. The Dow ended the year down about 8.8%, and 10.3% off its 52-week high. The S&P 500 lost 19.4% for the year and sits more than 20% below its record high. The tech-heavy Nasdaq tumbled 33.1% last year.
Of course, there may be brighter days ahead. History shows the U.S. stock market tends to rebound after down years. In fact, the S&P 500 has, on average, rebounded by 15% in the next year following a year where it lost more than 1%.
Investors are getting a bundle of data in the first trading week of the year that will give further information on the state of the economy.
On Tuesday, the U.S. purchasing managers index for manufacturing came in lower than expected, signaling the fastest slip since May 2020. Later in the day, construction spending for November ticked up slightly, showing that the industry may be recovering.
Wednesday is a big day with the Job Openings and Labor Turnover Survey, better known as JOLTS, due out in the morning and the minutes of the Fed’s latest policy meeting set to come out in the afternoon.
They’re also looking forward to Friday’s December jobs report, the final employment report the Fed will have to consider before its next meeting on Feb. 1. There are also several speeches by Fed presidents scheduled Thursday and Friday.
Netflix is among the best positioned stocks as advertising recession looms, Evercore ISI’s Mahaney says
Netflix is among the best positioned mega cap tech names to weather an advertising recession, according to Evercore ISI’s Mark Mahaney.
“Netflix in particular has got the most interesting new product catalysts out in the space with this ad offering that is taking off slowly,” the top tech analyst told CNBC’s “Closing Bell” on Tuesday. “But there’s a lot of potential here, and Netflix wins so many different ways from the rollout of this ad-supported offering.”
Looking ahead, Mahaney expects revenue growth to slow across the sector given its connection to consumer discretionary spending.
“Revenue growth is going to be slowing down for almost all of these names unless they have a new product cycle, unless they’re somewhat recession resilient,” he said.
Stocks close lower on first trading day of 2023
Stocks started the new year off with a disappointing first day as some of the same themes that weighed on markets in 2022 continued in 2023.
The S&P 500 fell 0.40%, slipping from highs of the day when December’s manufacturing index declined at the fastest pace since May 2020. The Dow Jones Industrial Average ended the day down 12.66 points, or 0.04%, as shares of Boeing bolstered losses. The Nasdaq Composite shed 0.76%.
Tech stocks led the slide, with shares of Tesla and Apple weighing most on markets.
Energy is the worst-performing sector in the S&P 500 today
After a blockbuster year in 2022, the energy sector has started off the new year with a disappointing performance. The sector shed more than 4% on Tuesday, the first trading day of 2023, and was the worst performer in a down day for the stock market.
The slip was driven in part by natural gas prices, which plummeted amid warmer weather and weighed on company shares. In addition, stocks such as APA, Devon Energy, Coterra Energy, Hess Oil and Marathon Oil slipped.
In 2022, the energy sector was the best performer in the stock market as rising oil prices boosted shares of industry companies.
TUE, JAN 3 20233:20 PM EST
Fed tightening has already tamed inflation expectations says Rosenblatt Securities.
The Federal Reserve’s aggressive tightening cycle has already tamed both fears and expectations related to the high inflation that dominated 2022, according to Rosenblatt Securities.
“As inflation decelerates, it may linger longer than many suspect, however the Fed has given signals that they will err on kicking inflation to the curb, at the risk of growth,” Michael Kiernan, Rosenblatt’s director of research, said in a note Monday. “If we do get another scare during the 1st half of 2023, that scenario likely triggers an entry point for many investors that have been comfortably sitting on the sidelines in T-bills with 4%+ yields.”
“When this liquidity returns to equities there likely will be a hunger for long-duration equities, particularly in the high-growth [technology, media, and telecom] sector,” he added. “Demand for growth will also face much less of a valuation headwind in 2023 as fundamentals rule the day.”
The firm expects a strong second half of the year for stocks, led by tech, but noted that investors should focus We expect a particularly strong 2nd half 2023 for equities, led by Tech.
Stocks are down heading into the final hour of trading Tuesday
Stocks fell Tuesday, erasing gains from earlier in the day, as some of the same fears from 2022 weighed on markets in the first trading day of 2023.
The Dow Jones Industrial average slid 90 points, or 0.27%. The S&P 500 and the Nasdaq Composite were down 0.52% and 0.73%, respectively. Shares of Tesla and Apple lost 11% and 4%, respectively, weighing on the broader marke.