by Alex Eule
Another Long Week. A week that began with promise for stocks ended the way so many others have this year -- deep in negative territory. After a 1.1% slide Friday, the S&P 500 finished the week down 2.1%. The Nasdaq Composite fell 1% on the day and 2.7% on the week.
Both indexes were down for a third consecutive day after large positive moves on Monday and Tuesday. In between, of course, the Federal Reserve raised rates for a seventh consecutive time on Wednesday, and Fed Chairman Jerome Powell continued his hawkish commentary about the need to fight inflation. That became the pivot point on the week -- and it wasn't kind to stocks.
Stocks now have just two more weeks to make up some ground in 2022. It turns out the peak on the year came back on Jan. 3, which also happens to be the first trading session of the year. Put another way, stocks have gone nowhere but down in 2022.
My colleagues weigh in this week with what to expect when the calendar turns, and it's not entirely optimistic. Nicholas Jasinski writes in this weekend's Barron's that "2023 could seem like two years wrapped in one, with the stock market first falling in anticipation of a recession, only to rebound as the outlook improves toward 2024."
Eric Savitz offers a similar forecast for tech stocks. Nick and Eric both note that things will need to get worse before they get better.
The other pivot point this week came from some disappointing data on Thursday, specifically retail sales, which fell 0.6% month-over-month in November, well below estimates. It was the largest decline in 11 months, UBS's Mark Haefele notes, "highlighting that while the labor market remains tight, consumer budgets are under pressure."
Take weak retail sales and a still-hawkish Fed and investors start to face their worst fears: that a slowing economy may not be enough to deter the Fed's rate hikes. If that happens, hopes for a soft landing in 2023 could start to fade.
The Calendar
A bevy of economic data and several notable companies reporting will keep investors busy next week, before things slow down for the holidays.
On Tuesday, Nike, FedEx, and General Mills release quarterly results, followed by Cintas and Micron Technology on Wednesday. CarMax and Paychex will report on Thursday.
Barron's warns investors not to expect a Santa Claus rally as the Fed is playing the Grinch this year with its hawkish monetary policy.
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