Wall St ends 2022 with biggest annual drop since 2008

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Dec. 30 (Reuters) –

U.S. stocks ended the final trading session of 2022 lower on Friday, capping a year of steep losses driven by aggressive interest rate hikes to curb inflation, recession fears, the Russian-Ukrainian war and growing concerns about COVID cases in China.

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Wall Street’s three major indices posted their first annual decline since 2018 as an era of accommodative monetary policy ended with the Federal Reserve’s fastest pace of rate hikes since the 1980s.

It was also their biggest annual decline since the 2008 financial crisis, largely driven by growth stocks as Fed rate hikes boosted US Treasury yields and made equities less attractive.

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“The main macroeconomic reasons … came from a combination of events: the continued supply chain disruption that began in 2020, the surge in inflation, the delay with which the Fed started its tightening program rates in order to contain inflation, » said Sam Stovall. , chief investment strategist at CFRA Research.

He also cited economic indicators pointing to recession, geopolitical tensions, including war in Ukraine, and surging COVID cases in China and strained relations with Taiwan.

Growth stocks have been under pressure from rising yields for much of 2022 and have underperformed their economy-bound value counterparts, reversing a trend that has lasted for much of the past decade.

Apple Inc, Alphabet Inc, Microsoft Corp, Nvidia Corp, Amazon.com Inc, Tesla Inc are among the worst drags on the S&P 500 growth index, down 28% to 66% in 2022.

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The S&P 500 growth index has fallen around 30.5% this year, while the value index is down 7.7% as investors favor sectors with high dividend yields and stable earnings like energy.

Energy posted stellar annual gains of 58% due to a spike in oil prices.

Ten of 11 S&P sector indices fell on Friday, led by real estate and utilities.

« The housing market has really slowed and the value of individual homes has fallen from the highs of the beginning of the year, » said J. Bryant Evans, investment adviser and portfolio manager at Cozad Asset Management in Champaign, Illinois.

« It affects people’s mindset and actually affects their spending a bit. »

Attention has shifted to the outlook for corporate earnings in 2023, with growing concerns about the likelihood of a recession.

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Still, signs of economic resilience in the United States fueled concerns that rates might stay higher, although easing inflationary pressures raised hopes for moderate rate hikes.

Money market players see a 65% chance of a 25 basis point hike at the Fed’s February meeting, with rates expected to peak at 4.97% by mid-2023.

According to preliminary data, the S&P 500 fell 9.43 points, or 0.24%, to end at 3,839.85 points, while the Nasdaq Composite fell 11.05 points, or 0.11%, to 10 467.74. The Dow Jones Industrial Average fell 70.47 points, or 0.21%, to 33,152.55.

(Reporting by Echo Wang in New York; Additional reporting by Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by Vinay Dwivedi, Arun Koyyur, Sriraj Kalluvila and Richard Chang)