Stocks dropped Friday, building on their year-end sell-off, as fears grow over a recession taking place as the Federal Reserve continues raising rates.
Market observers are now focused on future jobs reports into 2023 , as the labour market has grown in significance following Federal Reserve Chair Jerome Powell’s most recent press conference. The Fed chair cited the persistence of wage inflation, even as inflation in goods and shelter appear to be slowing down.
The Dow Jones Industrial Average lost 281.76 points, or 0.85 per cent, to 32,920.46. The S&P 500 fell 1.11 per cent to 3,852.36. Meanwhile, the tech-heavy Nasdaq Composite declined 0.97 per cent to 10,705.41.
Trading was especially volatile Friday with a large amount of options expiring. There were $2.6 trillion worth of index options expiring, the highest amount “relative to the size of the equity market in nearly two years.”
Stocks fell this week in the wake of the Fed’s 50 basis point interest rate hike on Wednesday — the highest rate in 15 years. The prospects of a “Santa Claus rally”, or year-end uptick, in markets this year have dimmed, as the majority of global central banks have adopted tightening policies
In Chinese news the sudden U-turn on President Xi strict zero-Covid policy of containment has seen the Omicron variant of the virus run rampant through several big cities. The capital is leading the surge in infections, with over half of Beijing’s 22mn population infected, according to some estimates. The surge has caught officials and companies off guard, with supply chains and factory production at risk
China, unlike other major economies, is experiencing low and falling inflation. The key economic challenge for Beijing moving forward will be how to revive consumer spending and business confidence.
On the Twitter front, the head of Elon Musk’s family office has approached investors who helped the billionaire buy Twitter for $44bn in October to try and raise new funds as the social media company continues to bleed cash and faces heavy interest payments on its debts. This all comes as Musk continues to sell Tesla shares despite reassurances in April that there would be no more Tesla share sales
In commodity news, the US government is to begin replenishing the world’s biggest emergency oil stockpile after draining it for months, saying it was moving to bolster the country’s energy security and give domestic crude producers “assurance” to drill more wells. The decision to buy crude again for the Strategic Petroleum Reserve follows a decline in oil prices in recent weeks.
Across the sectors the real estate and consumer discretionary sectors were the biggest laggards
Shares of US banks are taking a beating in December, as worries over an expected recession and weakening profit margins dull the industry’s appeal. The S&P 500 banks index has slumped some 11 per cent this month against a 5.5 per cent drop for the broader. Among the hardest hit were shares of Bank of America (BAC.N), which have fallen 16 per cent this month. Shares of Wells Fargo & Co (WFC.N) have slumped about 14 per cent, and those of JPMorgan Chase & Co (JPM.N) are down over 6 per cent.
The SPI futures are pointing to a 0.4 per cent fall.
One Australian dollar at 7:20 AM has strengthened compared to the US dollar on Friday buying 67.05 US cents (Fri: 66.99 US cents).
Iron ore futures are pointing to a 2.7 per cent fall.
Gold gained 0.7 per cent. Silver added 0.1 per cent. Copper shed 0.04 per cent and oil lost 2.4 per cent.
Figures around the globe
Across the Atlantic, European markets closed lower. Paris fell 1.1 per cent, Frankfurt lost 0.7 per cent and London’s FTSE closed 1.3 per cent lower.
In Asian markets, Tokyo’s Nikkei lost 1.9 per cent, Hong Kong’s Hang Seng added 0.4 per cent and China’s Shanghai Composite closed 0.02 per cent lower.
On Friday, the Australian sharemarket lost 0.8 per cent to close at 7149.
Kelly Partners Group (ASX:KPG) is paying 0.3993 fully franked
Civmec Ltd (ASX:CVL)
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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