US stocks closed out last year lower on Friday, capping a year of sharp losses driven by aggressive interest rate hikes to curb inflation, recession fears, the Russia-Ukraine war and rising concerns over COVID-19 cases in China.
Wall Street’s three main indices booked their first yearly drop since 2018 as an era of loose monetary policy ended with the US Federal Reserve’s fastest pace of rate hikes since the 1980s.
The benchmark S&P 500 lost 9.78 points, or 0.25 percent, on Friday, to 3,839.50. It was down 0.14 percent from a week earlier, while shedding 19.4 percent over the whole of last year, marking a US$8 trillion decline in market cap.
The tech-heavy NASDAQ lost 11.61 points, or 0.11 percent, on Friday, ending the year at 10,466.48, with a 33.1 percent drop over the 12-month period.
The Dow Jones Industrial Average lost 73.55 points, or 0.22 percent, on the last trading day of the year, to 33,147.25, performing better than the other two indices with a loss of 8.9 percent over the year.
However, the annual declines for all three indices were the biggest since the 2008 financial crisis, largely driven by a rout in growth shares as concerns over the Fed’s rapid interest rate hikes gave US Treasury yields a boost.
Photo: AFP
“The primary macro reasons ... came from a combination of events: the ongoing supply chain disruption that started in 2020, the spike in inflation, the tardiness of the Fed beginning its rate tightening program in the attempt to corral the inflation,” CFRA Research chief investment strategist Sam Stovall said.
He also cited economic indicators pointing to recession, geopolitical tensions including the Ukraine war and China’s surging COVID-19 cases.
Growth stocks have been under pressure from rising yields for much of last year and have underperformed their economically linked value peers, reversing a trend that had lasted for much of the past decade.
Apple Inc, Alphabet Inc, Microsoft Corp, Nvidia Corp, Amazon.com Inc and Tesla Inc are among the worst drags on the S&P 500 growth index, down between 28 percent and 66 percent last year.
The S&P 500 growth index fell about 30.1 percent last year, while the value index was down 7.4 percent, with investors preferring high dividend-yielding sectors with steady earnings such as energy.
Energy has recorded stellar annual gains of 59 percent as oil prices surged.
Ten of the 11 S&P sector indices dropped on Friday, led by real estate and utilities.
“The housing market has really slowed down and the values of people’s homes have declined off of the highs earlier [last year],” said J. Bryant Evans, investment advisor and portfolio manager at Cozad Asset Management in Champaign, Illinois. “That affects people’s mind frame and actually affects their spending a little bit.”
The focus has shifted to the corporate earnings outlook for this year, with growing concerns about the likelihood of a recession.
Still, signs of US economic resilience have fueled worries that rates could remain higher, although easing inflationary pressures have raised hopes of dialed-down rate hikes.
Money market participants see 65 percent odds of a 25-basis-point hike at the Fed’s meeting next month, with rates expected to peak at 4.97 percent by the middle of last year.
Volume on US exchanges on Friday was 8.50 billion shares, compared with the 10.79 billion average for the full session over the past 20 trading days.
Declining issues outnumbered advancers on the NYSE by a 1.50-to-1 ratio; on NASDAQ, a 1.03-to-1 ratio favored decliners.
Last year, the S&P 500 posted no new 52-week highs and no new lows, while the NASDAQ Composite recorded 85 new highs and 134 new lows.
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