[New York Stock Market] Worst Year Since 2008... Nasdaq Down 33% This Year

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market closed lower across the board on the 30th (local time), the last trading day of the year, hovering around the flat line. Amid year-end tax-loss harvesting and concerns over an economic recession next year, the New York stock market, which had been weak mainly in big tech stocks, ended a difficult year of trading with a downward trend. On an annual basis, it was the worst year since 2008.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 73.55 points (0.22%) from the previous session to close at 33,147.25. The large-cap S&P 500 index dropped 9.78 points (0.25%) to 3,839.50, and the tech-heavy Nasdaq index declined 11.60 points (0.11%) to 10,466.48. The New York stock market, which started lower, struggled throughout the day but showed an upward trend centered on tech stocks toward the end, reducing the overall decline.

[Image source=Reuters Yonhap News]

Thus, the three major indices of the New York stock market closed lower for the first time since 2018. It is also the worst performance since the 2008 global financial crisis. In particular, the Nasdaq index, which is tech-heavy, plunged 33.19% over the year as investors shunned growth stocks amid recession fears. CNBC reported that this is the first time since the dot-com bubble that the Nasdaq index has fallen for four consecutive quarters. The annual declines of the Dow and S&P 500 indices reached approximately 8.78% and 19.44%, respectively. MarketWatch reported that the annual decline of the S&P 500 is the fourth largest on record. On a monthly basis, the Nasdaq index fell 8.7%, the Dow dropped 4.2%, and the S&P 500 declined 5.9% in December alone.

The Federal Reserve's (Fed) aggressive interest rate hikes continuing from the beginning of the year and the resulting recession concerns suppressed investor sentiment throughout the year. Geopolitical risks such as Russia's invasion of Ukraine and unstable economic data also increased market uncertainty.

Art Kisin of UBS said, "We have experienced everything from China's COVID-19 issues to the Ukraine invasion. All were very serious," adding, "But for investors, the Fed's actions are the key." Sam Stovall, Chief Investment Strategist at CFRA Research, diagnosed, "The ongoing supply chain disruptions and soaring prices starting in 2020, combined with the Fed's delayed tightening program to curb inflation, have created macroeconomic bearish factors."

By sector, technology and telecommunications stocks were particularly weak. The sector with the largest decline in the S&P 500 this year was telecommunications. In contrast, energy stocks were the only ones to rise by about 60% due to rising oil prices. On this day as well, energy stocks were the only sector among the 11 S&P 500 sectors to gain.

Market participants expect the stock market to face another challenging year in 2023. This is because the Fed continues tightening to lower still-high inflation, highlighting the possibility of economic and corporate earnings recessions. Art Hogan, Chief Market Strategist at B Riley Wealth, said, "We have never seen market conditions like now, where both stocks and bonds are falling simultaneously," adding, "It is good news that we are passing through this year, but the first few months of 2023 will not be smooth."

In the New York bond market on this day, Treasury yields rose. The 10-year U.S. Treasury yield traded at 3.88%, up 4 basis points (1bp=0.01 percentage point) from the previous session. According to Dow Jones Market Data, the 10-year yield surged 2.34 percentage points from the beginning of the year through the previous day, marking the worst year since 1977. CNBC reported that although the bond market ended the year with some optimism, it still showed signs of the volatility that plagued the market throughout 2022.

The dollar weakened. The Dollar Index, which shows the value of the dollar against six major currencies, stood at 103.53, down 0.43% from the previous day. On an annual basis, the Dollar Index posted its largest rally since 2015.

Oil prices rose. The February delivery West Texas Intermediate (WTI) crude oil price traded on the New York Mercantile Exchange (NYMEX) closed at $80.26 per barrel, up $1.86 (2.4%) from the previous session. Based on the front-month contract, WTI rose 6.7% this year, continuing its upward trend for the second consecutive year.

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