4.05pm: Stocks on pace for worst drop since 2008
Wall Street's main indexes gave up their modest initial gains by the close on growing concern about a recession in 2023 and surging COVID-19 cases in China.
At 4pm, the Nasdaq had lost 1.4% to close at 10,213 points, the S&P 500 fell 1.2% to 3,783 and the Dow Jones retreated by 1.1% at 32,876.
Energy stocks were the biggest losers, falling1.9% as worries over demand in China weighed on oil prices.
12.05pm: Drifting into 2023
US stocks turned red at midday in a choppy festive trading session.
Shortly after noon, the Dow Jones Industrial Average had shed 273 points or 0.8% at 32,968 points, the S&P 500 was down 36 points or 0.9% at 3,793 points, and the Nasdaq Composite had lost 124 points or 1.2% at 10,229 points.
In terms of major movers, Kala Pharmaceuticals Inc surged more than 274% after the biotech company announced that the Food and Drug Administration (FDA) has accepted its Investigation New Drug (IND) application for its lead candidate KPI-012 for the treatment of a rare eye disease called persistent epithelial defect.
Innovative Eyewear Inc, a developer and retailer of smart eyewear under the Lucyd and Nautica brands, had also jumped about 35% on the news it has entered into a multi-year global licensing agreement with Authentic Brands Group for Eddie Bauer branded smart eyewear.
On the flip side, meme stock GameStop Corp was down about 5.4% as the embattled video game retailer continues to struggle.
OANDA senior market analyst Craig Erlam noted the choppy trading in financial markets on Wednesdays in what is always quite thin trade as investors continued the festivities into the new year.
“There's certainly a strong sense of holiday trade to the markets today, with light news flow combined with lower liquidity creating choppy but ultimately insignificant moves,” he said.
“It very much feels like we're now just drifting into 2023 at which point I expect things will quickly pick up again.”
9.35am: Hong Kong relaxes COVID rules boosting investor sentiment
US stocks rose at the open on Wednesday as investors look ahead to the new year after the stock market’s dreary performance in 2022.
Just after the market opened, the Dow Jones Industrial Average had added 93 points or 0.3% at 33,335 points, the S&P 500 was up 11 points or 0.3% at 3,840 points, and the Nasdaq Composite was up 25 points or 0.2% at 10,378 points.
Tesla Inc stock rebounded about 3.7% after falling 11.4% yesterday on reports that the electric car maker would continue a weeklong pause in production at its Shanghai facility.
Investor sentiment has been lifted slightly by the news that Hong Kong will be removing almost all of its COVID-19 restrictions after earlier this week mainland China outlined plans to no longer require international arrivals to go into quarantine.
ING Greater China chief economist Iris Pang said, even though the Chinese government was working hard to open the domestic economy with the easing or removal of COVID measures, the timing was not perfect.
“Our house view is that the US and Europe could enter a mild recession in the first half of 2023,” Pang commented. “As such, there will be a fall in external demand, and export-related activities, including manufacturing, should slow, which would derail the recovery of the Chinese economy.”
6.30am: Stronger start to trading day expected
US stocks are expected to edge higher in early deals on Wednesday morning as traders look to close out a dismal year and prepare for more volatility in 2023.
Futures for the Dow Jones Industrial Average (DJIA) were 0.3% higher in pre-market trading, while those for the S&P 500 were also ahead 0.3%, and contracts for the Nasdaq 100 futures added 0.1%.
The holiday-shortened trading week started in mixed fashion on Tuesday, with the DJIA ending 0.1% higher, but the S&P 500 shedding 0.4%, while the Nasdaq Composite dived 1.4%.
The Nasdaq underperformance was driven by an 11% drop in Tesla Inc - the seventh straight session of losses for the stock - after The Wall Street Journal reported that the electric vehicle maker would continue a weeklong production pause at a Shanghai facility.
James Hughes, Global Head of Brand for ScopeMarkets.com commented: "It was a rather muted return from the Christmas break for Wall Street, but futures are pointing towards a slightly stronger start to Wednesday’s trade."
He noted: "Economic data yesterday offered little in the way of direction, although the fact that house prices aren’t falling further has the potential to give the Fed additional ammunition in its campaign when it comes to monetary policy tightening so this could in turn serve to limit upside potential for stocks.
"With that in mind, today’s pending home sales reading will also be closely followed – a decline is expected but again if this is limited in scale then it could play into the hands of policy hawks."
Aside from the US pending home sales numbers, manufacturing data from the Richmond Federal Reserve will also be released on Wednesday morning. Traders will be looking for signs the economy is cooling off, which they hope could indicate to the Federal Reserve that interest rate hikes can continue slowing.
With three trading days left in 2022, the stock market is on track for its worst year since 2008. The Nasdaq has performed the worst of the three main indexes, losing nearly 34% this year, while the DJIA and S&P 500 are on track to lose over 8% and almost 20%, respectively.