‘We’re f***ed’: Stock market’s unexpected and rare end-of-year crash

Traders received an early lump of coal in their Christmas stocking as indices across the globe plunged overnight.

The S&P 500, Nasdaq and Dow all faltered on a rough day for traders. Pictures: Getty, Bloomberg

So much for the “Santa rally”.

A mini stocks revival triggered by positive US economic data faltered overnight Thursday, in a rare loss for a time of year that normally delivers good news for traders.

Wall Street stocks fell with more positive economic data prompting concerns among investors about rate hikes by the US Federal Reserve.

The S&P 500 closed 1.4 per cent lower after being down as much as 2.9 per cent earlier. The Nasdaq fell 2.2 per cent and the Dow gave up 1 per cent.

Australian traders weren’t spared as ASX futures were down 0.9 per cent and when the market opened at 10am AEST, The S&P/ASX 200 index had plunged 0.8 per cent.

Days in the second half of December with 2%+ S&P 500 declines since 1998:

12/20/00
12/18/08
12/17/18
12/21/18
12/24/18
12/22/22 (pending)

— Conor Sen (@conorsen) December 22, 2022

“The momentum of the rally the stock market enjoyed yesterday has not carried over (today),” said Patrick O’Hare at Briefing.com.

“Better than expected third quarter GDP and weekly initial claims data … has fuelled concerns about Fed tightening” interest rates further and for longer, he added.

Revised Commerce Department figures now show the US economy expanded at a 3.2 per cent annualised rate in July through September, up from a previous estimate of 2.9 per cent.

But the poor day had many declaring turbulent times are ahead in 2023.

“In 2022, the number of weeks the S&P 500 lost money is second only to 1931,” tweeted portfolio manager Michael A. Gayed.

“In 1931, the S&P 500 in December was down over 14%. We’re f***ed. Few understand this.”

⚠️BREAKING:

*U.S. STOCK INDEXES HIT SESSION LOWS; NASDAQ LAST DOWN MORE THAN 3%

*S&P 500 FALLS BELOW 3800$DIA$SPX$QQQ 🇺🇸🇺🇸 pic.twitter.com/HI46CrUhc8

— Investing.com (@Investingcom) December 22, 2022

Meanwhile, first-time and continuing jobless claims fell last week. Both figures indicate that the US economy is still racing ahead at full tilt, while the Fed has indicated it will raise interest rates until it achieves a sufficient slowdown in activity to tame rampant inflation.

The drop in Wall Street equities “likely reflects the growing feeling of concern that the Federal Reserve will continue pushing rates upwards in the absence of any major economic distress signal”, said Joshua Mahony, senior market analyst at online trading platform IG.

“The bears are back in charge today,” he added.

Tech stocks took a beating after US computer storage memory manufacturer Micron posted softer-than-expected earnings, with its shares slumping 4.5 per cent.

“Micron’s earnings did not provide any optimism for the chip sector as they struggle with an inventory glut that will make it difficult for them to be profitable,” said market analyst Edward Moya at trading platform OANDA.

Elon Musk’s Tesla also suffered, falling almost nine per cent to continue its horror 2022 that has netted short sellers $15 billion.

Stay up to date with the latest market moves with Flash. 25+ news channels in 1 place. New to Flash? Try 1 month free. Offer available for a limited time only >

Elon Musk's Tesla is down almost 70 per cent year-to-date. (Photo by Christian Marquardt - Pool/Getty Images)

Equities have been volatile in recent weeks as investors weigh up interest rate hikes and global recession risks against the reopening of China’s economy.

Thursday’s reaction of investors to good economic news was the opposite the day before, when a bigger-than-expected jump in US consumer confidence this month sent stocks soaring.

All three main indices on Wall Street ended more than one per cent higher on Wednesday.

Asian stocks took their cue from those gains, led by Hong Kong which rose by more than two per cent with tech firms tracking their US counterparts higher and property stocks boosted by comments from top Chinese officials pledging support for the beleaguered sector.

Towards the end of the day, Shanghai dipped on worries about rising Covid cases in China.

But hopes for a Santa rally — a period of rising share prices around the year-end holidays — were crushed as the momentum failed to carry over into European trading.

London ended the day down 0.4 per cent, while Paris shed 1.0 per cent and Frankfurt fell 1.3 per cent.

“Bye-Bye Santa rally, Grinch sell-off is here to stay,” said OANDA’s Moya.

— with AFP