The stock market closed lower for the third day in a row on concerns that 2023 could bring a global recession and that central banks will continue to aggressively raise rates. Striking workers at Starbucks helped send the coffeehouse chain's shares lower as a unionization tide continues to hit corporate America.
The indexes were down all day and then climbed to trim losses in late afternoon. The Nasdaq composite closed down 1% while the S&P 500 dropped 1.1%. The Dow Jones Industrial Average fell 0.9%. The small-cap Russell 2000 index dropped 0.6%.
Volume rose sharply on the Nasdaq but fell slightly on the NYSE vs. the same time on Thursday, early data showed. Friday is the quarterly stock market event with options and futures expiring, commonly referred to as "quadruple witching." Market volume tends to be higher during those days.
On Friday, the S&P 500 followed the Nasdaq in falling below the 50-day moving average. The S&P is now at its lowest level since Nov. 9.
On the week, the S&P 500 dropped 2.1%, the Nasdaq down 2.7 % and the Dow Jones fell 1.7%.
The yield on the benchmark 10-year Treasury note rose 4 basis points to 3.49%. Crude oil prices fell 2.4% to $74.31 per barrel.
The Innovator IBD 50 ETF closed 0.9% down, led lower by biotech Catalyst Pharmaceuticals. It dropped 5% to below its cup-with-handle buy point of 16.76.
Homebuilder Stocks Slide On Recession Concerns
All 11 S&P sectors were down Friday, led by the S&P Real Estate Select Sector ETF, which was down 3%.
Homebuilder stocks were hit hard as concerns of a recession outweighed a lift earlier in the week as inflation subsided to an annual rate of 7.1%. Investors are concerned that even if mortgage rates go down many potential homeowners won't be able to afford one.
KB Home dropped 2.1% and Meritage Homes lost 2.1%. Both stocks are on the IBD 50.
"Market volume increases during major expiration days, and that can usually move a nervous market in one direction or another," said Quincy Krosby, chief global strategist for LPL Financial. "Market participants continue to wonder if the Santa Claus rally ... is really going to take place. That the Senate passed a one-week funding bill to keep the government open until next Friday could also be the kind of net positive event that brings cheer to the market."
Next week marks the start of Santa Rally seasonality for the stock market, peaking between Christmas and the first two trading days of 2023.
Stock Market Falls On Weak Business Activity
The flash composite Purchasing Manager's Index (PMI) dropped sharply to 44.6, below November's 46.4 number and well below Econoday's consensus forecast of 46.7. The flash PMI combines both manufacturing and services into one index.
Adding to investors' concerns about rate hikes and a global recession, the European Central Bank said Friday it would continue to raise rates in half-percentage-point increments next year. The Bank of England was the only major central bank this week to signal caution about raising rates much higher, saying it believed the U.K. economy was already in a recession.
Facebook-parent Meta Platforms rallied 2.8% after JPMorgan analyst Doug Anmuth raised the social media giant to an overweight rating and raised the price target to 150.
The analyst took an upbeat view after a miserable year, noting that "heading into 2023, we believe some of these top and bottom-line pressures will ease, and most importantly, Meta is showing encouraging signs of increasing cost discipline."
Starbucks Stock Falls As Workers Begin 3-Day Strike
Tesla CEO Elon Musk banned high-profile and mostly liberal journalists from CNN, The New York Times and The Washington Post for publishing real-time coordinates of his airplane movements. TSLA stock sold off Friday, dropping 4.7% to the lowest in more than two years.
Tesla is down 57% as of Dec. 16, on track to be the stock's worst performing annual loss in its history. That would easily surpass 2016's 11% fall, the only other annual decline since Tesla stock came public in 2010.
Starbucks shares gave up 1.2% as the stock has fallen three days out of five this week, but remains above the 50-day moving average. SBUX stock is fading back toward a buy zone from a bottoming base cleared Nov. 9. The buy point was 93.58.
A thousand Starbucks workers at 100 U.S. stores nationwide are starting a three-day strike, as a unionization tide continues to hit corporate America. In a tweet Friday, the Starbucks Workers United described the three-day strike as the longest yet in its yearlong unionization campaign. Starbucks says it's been negotiating in good faith.
Stock Market Movers And Shakers
Nasdaq 100 component Adobe rallied 3% after beating fiscal Q4 2022 earnings estimates. The desktop software maker gave bullish guidance for the first quarter of 2023.
Accenture on Friday reported fiscal first-quarter earnings and revenue that topped Wall Street targets. However, shares fell 5.9% after revenue guidance came in below expectations. Currency exchange rates impacted the company's outlook.
Exact Sciences rocketed 16.4% after rival Guardant Health disclosed results in a three-year trial of its blood-based test for colorectal cancer. Guardant's results lagged those of rival Exact Sciences. GH plunged 27% on the news.
U.S. Steel rose 5.8% after raising Q4 EPS guidance above estimates. The stock is testing its 200-day line, which has been horizontal for months.
Follow Michael Molinski on Twitter @IMmolinski
