[New York Stock Market] Despite Tesla's Rebound, Investor Sentiment Worsens... Nasdaq Down 1.35%

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed lower on the 28th (local time) despite a rebound in Tesla's stock, which had recently driven the market plunge. Concerns over an economic recession persist, with the market sentiment struggling to recover as the market cap leader Apple’s stock fell once again.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,875.71, down 365.85 points (1.10%) from the previous session. The large-cap focused S&P 500 index fell 46.03 points (1.20%) to 3,783.22, and the tech-heavy Nasdaq index dropped 139.94 points (1.35%) to 12,213.29.

[Image source=Reuters Yonhap News]

By sector, all segments of the S&P 500 index declined. Particularly, energy stocks saw the largest drop of 2.22% due to falling international oil prices. Technology, industrials, real estate, and communication stocks also fell by more than 1%.

Tesla, a representative tech stock that had recently driven the overall index decline, rebounded after eight trading days. The rebound is interpreted as bargain hunting, considering the stock had fallen more than 40% just this month. Tesla’s stock closed up 3.31% from the previous session. In contrast, Apple fell more than 3%, hitting a new yearly low. Southwest Airlines also dropped over 5% amid thousands of flight cancellations.

Investors on this day focused on the stock movements of Tesla, Apple, and others, whose prices had recently fallen sharply, amid weakened expectations for a year-end Santa rally. With only two trading days left until the end of the year, trading volume has decreased and upward momentum is limited, leading to an assessment that these stocks are influencing overall market sentiment. The three major indices, which started the day lower, briefly turned positive during the session before falling back into negative territory.

Louis Navellier, founder of Navellier & Associates, said, "(The market) briefly turned green (up) across the board during the session but did not hold," adding, "The market seems exhausted. We are not expecting a large rally and just hope there are no major losses until Friday afternoon." Eric Jason, founder of EMJ Capital, appeared on CNBC’s Closing Bell and pointed to Tesla’s sharp decline this month, saying, "A year ago, Elon Musk was a hero and panic buying drove the stock up. But now, he is leading panic selling." Investment bank Baird lowered Tesla’s target price from $316 to $252 on the same day.

If the three major New York stock indices end 2022 at the current levels, it will mark the worst performance since the 2008 global financial crisis. Especially, the tech-heavy Nasdaq index is recording the largest loss among the three major indices this year, with a decline in the 30% range as investors shun growth stocks amid recession fears. The Dow and S&P 500 are estimated to fall by 8.5% and 19.7%, respectively.

Bespoke Investment Group evaluated that the Nasdaq index could close December down more than 10%, marking the worst December on record. This would surpass the previous worst December decline of 9.7% in December 2002.

Concerns over an economic recession due to interest rate hikes by the Federal Reserve (Fed) and other central banks continue. Rapha Tangler Investment’s CEO said, "Investors are overly pessimistic due to concerns that the rate hike cycle will continue," adding, "The economy could sharply slow next year and eventually enter a recession." According to a CNBC survey of 23 corporate CFOs, 80% expect a recession next year. Additionally, 56% of respondents predicted the Dow would fall below the 30,000 level next year.

The economic indicators released on this day were mixed. The Richmond Federal Reserve Bank’s December manufacturing index turned positive at 1, indicating expansion. However, the preliminary home sales index for November, based on signed contracts, fell 4.0% from the previous month, marking six consecutive months of decline. This was worse than Wall Street expectations. The preliminary home sales index also dropped 37.8% compared to the same month last year.

Brian Levitt, global market strategist at Invesco, said, "The preliminary home sales falling to the second-lowest level on record is a clear sign of economic slowdown," adding, "With the Fed maintaining a hawkish stance, interest rates continue to rise. Investors hope for a soft landing, but difficulties persist."

Additionally, investors paid attention to the possibility of a global surge in COVID-19 cases following China’s easing of restrictions, as well as various countries’ entry restrictions.

In the New York bond market, the yield on the U.S. 10-year Treasury rose to 3.886%. The 2-year yield, sensitive to monetary policy, fell slightly. The dollar index, which measures the dollar’s value against six major currencies, rose 0.3% to around 104.

International oil prices fell as expectations for economic and travel recovery following China’s easing of COVID-19 restrictions diminished. On the New York Mercantile Exchange, the February contract for West Texas Intermediate (WTI) crude oil closed at $78.96 per barrel, down $0.57 (0.72%) from the previous session. The U.S. government officially announced entry restrictions on travelers from China on the same day.

This content was produced with the assistance of AI translation services.