4.15pm: Tech sector's woes continue
Wall Street started the New Year on the back foot, despite a bright start, as falls in a number of tech heavyweights and weak manufacturing PMI figures dented the mood.
At the close the Dow Jones Industrial Average was down 13 points, or 0.04%, at 33,135, the S&P 500 was down 16 points, or 0.41%, to 3,824 and the Nasdaq Composite was 80 points lower, or 0.76%, at 10,387.
Shares of Tesla and Apple both slipped, weighing on the broader market and continuing the tech sector’s struggles of last year.
Tesla fell 12.24%, hitting its lowest level since August 2020, following disappointing fourth quarter deliveries while Apple shed 3.74% on reports that it will cut production due to weak demand. A broker downgrade by Exane BNP Paribas added to the downbeat mood surrounding the iPhone maker.
“A recessionary environment in 2023 could further hamper tech stock performance in the new year, as investors’ thirst would increase for value oriented companies and those with higher profit margins, more consistent cash flows, and robust dividend yields,” wrote Greg Bassuk, CEO of AXS Investments in New York.
12:23pm: Tesla a drag on the indices
At midday, the Dow was down 180 points, 0.5%, to 32,967, the Nasdaq Composite dropped 129 points, 1.2%, to 10,335 and the S&P 500 lost 31 points, 0.8%, to 3,808.
The benchmarks quickly reversed course into the red after opening the new year higher. Tesla Inc (NASDAQ:TSLA) is among the laggards. Shares of the Elon Musk-run electric automaker are down nearly 14%.
“The brief rebound at the end of 2022 for Tesla has merely provided other investors with the chance to sell, and the stock continues to act as a major drag on US indices," said Chris Beauchamp, chief market analyst at online trading platform IG. "The stomach-churning falls in the share price stand as testimony about how far investors seem to have fallen out of love with high-priced US equities. In the months to come Tesla will either prove to be an impressive bargain or the kind of value trap not seen for many years.”
9.35am: Positive vibes
The first trading day of 2023 has kicked off with all three major US indexes in positive territory.
Just after the market opened, the Dow Jones Industrial Average had added 73 points or 0.2% at 33,220 points, the S&P 500 was up 18 points or 0.5% at 3,857 points, and the Nasdaq Composite had gained 81 points or 0.8% at 10,548 points.
Saxo head of equity trading Peter Garnry said that US equities were rallying on the first day of trading following the positive vibes observed yesterday in Europe and today in Chinese equities.
“Investors are hoping that this year will prove more positive for equities than 2022 but many of the issues remain the same including margin compression, a slowing economy and inflationary worries,” Garnry said.
Also in focus today is electric carmaker Tesla Inc (NASDAQ:TSLA), which announced disappointing 4Q deliveries last night. Tesla shares were down 5.7% at the open, trading at about US$116.20.
“This year will likely prove to be a difficult one for Tesla due to margin pressures and ever-growing competition, but the EV maker is here to stay and demand will continue to grow,” Garnry commented.
“But for now, the Q4 delivery miss will add to investor worries over Tesla.”
6.30am: Traders shrug off bleak IMF outlook as 2023 gets underway
Wall Street is expected to start 2023 on the front foot despite some gloomy forecasts for the year ahead, with minutes from the most recent meeting of the Federal Open Market Committee (FOMC) tomorrow likely to set the tone for this week before non-farm payrolls on Friday.
Futures for the Dow Jones Industrial Average (DJIA) rose 0.7% in Tuesday's pre-market trading, while those for the broader S&P 500 index gained 0.8% and those for the Nasdaq-100 added 0.9%.
“The IMF is among those warning of a tough year, more so than the one we've just left, as the simultaneous slowing down of the US, EU, and China takes its toll,” commented Craig Erlam, a senior market analyst at OANDA.
“Of course, all forecasts at this moment are subject to enormous uncertainty around the war in Ukraine, inflation, interest rates, and China's Covid response, among others, but it seems almost everyone is going into 2023 with a healthy dose of trepidation," he added.
In the final trading session of 2022 on Friday, the DJIA closed 0.2% lower at 33,147 points, while the S&P 500 fell 0.3% to 3,840 and the Nasdaq finished at 10,466 points for a loss of 0.1%.
As far as the economic calendar is concerned this week, Erlam said the market is easing itself back in today with mostly revised PMIs and other tier-three data.
“Things will pick up on that front from tomorrow, with the December Fed minutes being released alongside some more significant data and that will continue into the end of the week when we get the first jobs report of the year,” he added.
At its December meeting, the FOMC reduced the pace of tightening from 75 to 50 basis points but appeared more hawkish than expected, with policymakers projecting a higher terminal interest rate and indicating that monetary policy will remain contractionary for longer.
“The FOMC minutes on Wednesday will likely confirm, again, the Federal Reserve’s tough stance to fight inflation,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “But more importantly, Friday’s jobs data will give an insight on whether the Fed is being successful fighting inflation.”