Session highs came minutes after the opening bell this morning, and slid almost uniformly lower as the day went on. We closed near session lows across all major indices: the Dow -365 points, -1.10%, the S&P 500 -1.20%, the Nasdaq dropped -1.35% and the small-cap Russell 2000 was -1.49%. This was after several days in a row of the Russell outperforming the rest of the field.
All 11 sectors in the S&P are down for the day, week and month. Apple AAPL has hit its second 52-week low in as many days. Some Santa Claus Rally! Are we sure Krampus isn’t involved with this week of trading?
We don’t know all that much more at this hour than we did a day ago. At least, that which we did learn does not seem to have registered with market participants on the day — we’re still looking for a place for indices to settle in the final day and a half of trading for 2022 (good riddance!). When we look around for a silver lining, one is quite apparent: we’ll be starting the year -10% on the Dow, -21% on the S&P, -35.5% on the Nasdaq and -24% on the Russell. Even a moderately good 2023 will deliver us notable market gains a year from now.
Pending Home Sales for November fell by more than double expectations: -4.0% versus -1.8% anticipated. This follows the downwardly revised -4.7%, and is now the sixth-straight month down on pending home sales numbers. These numbers are about Ground Zero for proof that inflation-fighting interest rates from the Fed this year have had the desired effect: housing prices were off to the races in 2021, and make up a large chunk of the overall U.S. economy.
Year over year, we see a new all-time low drop to -37.8%, a deeper cut than the revised -37.1% for October, which was the previous all-time low. All four geographical sectors were down — by more than -30% year over year! The Northeast performed worst in November: -7.9% on the month, -34.9% year over year; the Midwest lost -6.6% month over month, -31.6% year over year; the South dropped -2.3% for the month, -38.5% for the year; and the West -0.9%, but a whopping -45.7% from this time last year.
As we mentioned in this morning’s column, it’s this sort of housing data combined with employment data — expected next week for both private-sector payrolls (Wednesday) and non-farm results from the U.S. government (Friday) — that will have the potential to move markets, or at least begin speculation on whether the Fed will need to re-think its established dot-plot for monetary policy.
So the possibility that we see worse economic metrics from here is likely the best-possible chance for a shift in Fed funds rates for 2023 than what’s currently priced-into the markets. Perhaps that means Krampus gets to ride on Santa’s sleigh this year; if it brings us toward market and economic growth sooner than later, then so be it.
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