Stocks wobble with the Dow down 250 points as investors prepare for the new year

Verdance Capital's Megan Horneman says the first half of 2023 will be volatile

The stock fell on Wednesday as traders looked at the end of a lost year and prepared for 2023.

The Dow Jones Industrial Average lost 302 points, or 0.9%. The S&P 500 and Nasdaq Composite fell 1% and 1.3%, respectively.

Energy was the biggest laggard in the S&P 500 as oil prices declined. Marathon Oil and EQT were among the notable losers in the index. Meanwhile, Southwest Airlines continued its decline as it continued to cancel flights amid severe winter weather conditions. Shares fell nearly 2%.

“Stocks finally climbed in unison into the green, but it hasn’t held,” said Louis Nevelier, founder and chief investment officer at growth investment firm Nevelier & Associates. “On low volume, the market is doing its best to keep its head above water after a disappointing start to the official Santa Claus rally. There is a bit of upside as the hardest hit areas are seeing some bottom fishing.”

“The market appears to be tired, obviously no longer expecting a major technical rally and is expected until Friday afternoon without any meaningful losses,” Nevelier said. “Most of the major uncertainties of the year; China COVID, war in Ukraine, tight energy supplies, and central banks, will be waiting for us on the other side.”

As the final week of trading winds down, the stock market is on track for its worst year since 2008. The Nasdaq has been the worst performer of the three indexes this year, down 33.8%, as investors exited growth stocks amid growing recession fears. The Dow and S&P 500 are on track to drop 8.5% and 19.7%, respectively.

Economic data released Wednesday included pending home sales, which slipped 4.0% in November on a monthly basis, according to the National Association of Realtors. The decline came because high mortgage rates gave cold feet to potential buyers. Economists polled by Dow Jones had expected a decline of 1.8%.

“There are clear signs the economy is slowing, as shown by pending home sales falling today to the second lowest level on record,” said Brian Levitt, global markets strategist at Invesco. “Home sales have historically been a good driver of economic activity because a new home sale supports many industries. At the same time rates continue to rise as the Fed still signals an accommodative stance. In short, investors Looking forward to a cosmic soft landing but challenges remain.”

Tuesday marks the start of a holiday-shortened trading week. The Dow closed up 37.63 points, or 0.11%, at 33,241.56. The S&P 500 fell 0.40%.

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