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Market Snapshot: U.S. stocks close at lowest levels in more than a month as recession fears mount

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U.S. stocks were lower Monday, with Wall Street under pressure after the S&P 500 ended last week with its lowest close since early November on recession fears.

How stocks are trading

The Dow Jones Industrial Average
DJIA,
-0.57%

was down 93 points or 0.3%, at 32,827.

The S&P 500
SPX,
-0.86%

fell 24 points, or 0.6%, to 3,828.

The Nasdaq Composite
COMP,
-1.35%

was off 121 points, or 1.1%, at 10,585.

The S&P 500 logged a 2.1% weekly loss last week, ending Friday at its lowest level since Nov. 9. The Dow Jones Industrial Average saw a 1.7% weekly fall and the Nasdaq dropped 2.7%.

What’s driving the market

Investors have become increasingly concerned about a recession many feel is all but inevitable given the determinedly hawkish stance of major monetary authorities, such as the Federal Reserve and European Central Bank, who continue to battle high inflation.

Read: The stock market is sliding because investors now fear recession more than inflation

Last week, alongside the Bank of England and others, the two central banks increased interest rates by 50 basis points to multiyear peaks and stressed that borrowing costs would likely go higher for longer than the market had hoped.

“The Fed and ECB seem determined to leave a lump of coal in everyone’s stockings this holiday season,” said Stephen Innes, managing partner at SPI Asset Management.

“With economic data undershooting expectations, it’s not a stretch to think investors may shift their focus from inflation and the Fed to the growing impact that the Fed’s actions are likely to have on the economy in 2023,” Innes added.

The soft performance on Wall Street in previous sessions and worries about a global slowdown saw Asian stock markets fall back on Monday, with China’s Shanghai Composite
SHCOMP,
-1.92%

among the weakest amid more concerns about spiking COVID infections in the world’s most populous nation.

It may pay to take a long view on China, as it relaxes its COVID curbs, which have been seen as a brake on consumption in the world’s second-largest economy, said George Young, portfolio manager with Villere & Co., in a phone interview.

Villere & Co. expect mining company Freeport-McMoran Inc.
FCX,
-2.48%
,
for example, to benefit from a renewed pickup in copper demand as China’s economy eventually gets traction, Young said. Freeport looks set to see a down year in the near term but is set for 40% earnings growth three years out, predicated on China’s comeback, he said.

Analysts noted that investors had shifted from believing that bad news on the economy was good news for both bonds and equities — because it discouraged central banks from being too aggressive in their policy tightening — and were now taking bad economic news for what it is, a scenario that may damage company earnings.

Source: BTIG

“The biggest change in markets over the last few weeks, in our view, is the shifting correlation between stocks and bonds. For most of this year bonds and stocks traded in tandem, as inflation ruled the roost,” said Jonathan Krinsky, chief market technician at BTIG, in a note to clients.

“Recently, that has pivoted and lower rates have been met with lower stocks, presumably on fears of economic slowdown. We expect that theme to grow louder into 2023,” Krinsky added.

The National Association of Home Builders’ monthly confidence index fell two points to 31 in December, the trade group said on Monday. It’s the 12th month in a row that the index has fallen. Outside of the pandemic, the December reading of 31 is the lowest level since mid-2012.

Companies in focus

About 17.5 million Twitter votes were cast in favor of Elon Musk stepping down from leading the company, Musk’s Twitter account said Monday, a day after he posed the question to users of the social media platform. The news sent shares of Tesla Inc. 
TSLA,
+0.15%

up in premarket trade hopes that Musk would refocus his attention on the electric-car company he also heads, but shares were in negative territory after the opening bell.

The European Union accused Meta Platforms Inc. 
META,
-3.69%

of breaching antitrust rules by allegedly distorting competition in the markets for online classified ads. Meta shares fell 3%.

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