After a large rally in European stocks on the first trading day of the week, things ended up like this on Wall Street on Tuesday:
- The Dow Jones rose 0.1%.
- The S&P 500 fell 0.4%.
- The Nasdaq fell 1.4%.
Shares of Tesla ended the day down more than 11% and are now down more than 70% so far in 2022. The stock closed at $109, versus a peak of more than $400 last fall, and is now at the lowest point since late summer 2020.
Southwest Airlines dropped more than six percent after canceling nearly 3,000 flights on Monday and another 2,500 on Tuesday. The backdrop for the mass cancellation is the bitter cold and extreme weather in several places across the United States over the Christmas weekend, write Wall Street Journal.
The weakest since the financial crisis
There’s no escaping the fact that it’s been a very tough year for the stock market and all three major indexes on the New York Stock Exchange are heading for a negative return not seen in over a decade.
For the Dow, with just under a week left on the year, the bottom line is an 8.6% decline in 2022. It’s the weakest year for the industry-heavy index since the 2008 financial crisis, when the fall ended at 33.8 percent for the year.
In December, the decline is just over four percent and, if it persists, it will break a two-month high that began in the autumn.
The S&P 500, meanwhile, is down 19.3% so far this year, heading for its first annual decline in three years and its weakest year since 2008, when the decline ended at 38.5%. The composite index is also heading for its first monthly decline in two months.
The biggest drop, however, is the Nasdaq. The tech-heavy index was hit hard by rising inflation and rising interest rates, with many taking bets on growth companies off the table. Common to many of these is that companies are valued on the basis of expected future earnings, meaning that future cash flows discounted at higher interest rates give a lower present value.
This has become clear. The Nasdaq is heading for a decline of more than 30% for 2022, and is also heading for its weakest year since 2008, when the decline was 40.5%.
Lower volume
While many in the US and Norway were expecting a so-called “Christmas rally” in the stock market later this year, the huge recovery was long overdue.
The period from December 15 to the end of the first week of January has produced a very strong return in the stock market in recent years. Over the past thirteen years, the main index has risen by more than four percent on average during these three weeks, wrote DN before Christmas.
During the Christmas period, there may even be a little more activity than usual, due to the lower trading volume between Christmas and New Years.
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