The stock market closed lower for the fourth day in a row as weak housing data amplified concerns that 2023 could bring a global recession. Dow Jones component Walt Disney and Amazon lost ground Monday as the so-called Santa Claus rally was nowhere in sight.
The Nasdaq composite fell 1.5% while the S&P 500 dropped 0.9%. The Dow Jones Industrial Average lost 0.5%. The small-cap Russell 2000 index shed 1.4%.
Volume fell on the Nasdaq and the NYSE vs. the same time on Friday, early data showed. The S&P is now at its lowest level since Nov. 9.
This week marks the leading edge of Santa rally seasonality for the stock market, peaking between Christmas and the first two trading days of 2023.
The yield on the benchmark 10-year Treasury note rose 13 basis points to 3.59%. Crude oil prices gained 1.8% to $75.63 per barrel.
Housing Market, Recession Fears Slow Stock Market
All 11 S&P sectors lost ground Monday.
The S&P Real Estate Select Sector ETF and the S&P Communications Services Sector ETF were the worst-performing sectors. XLRE dropped an additional 2.2% after Friday's 3% drubbing.
The December housing market index came in at 31, lower than the 34 consensus and the lowest in 10 years. The measure tracks homebuilder assessments of present and future sales, and buyer traffic. The index is a weighted average of present sales of new homes, sales expected in the next six months, and traffic of prospective buyers.
The index has fallen short of expectations every month in 2022 as mortgage rates peaked above 7% in November, a level not seen since 1998. Rates have eased back toward 6%.
"The key monthly survey of homebuilders worsened again in December and was worse than expected," said Bill Adams, chief economist for Comerica Bank. "High mortgage rates are a huge headwind for housing."
Comerica forecasts a mild recession in the first half of 2023, predicting that housing prices will fall by mid- to high single digits from their early 2022 peaks to a trough in mid-2023.
Homebuilder stocks dropped on the bearish housing news, including KB Home, Lennar, Builders FirstSource and Meritage Homes.
Disney, Amazon, Apple Fall
Disney fell 4.8% after disappointing ticket sales of its "Avatar: The Way of Water" movie release in some major markets. The entertainment giant is down over 44% year to date and in bear market territory. It is the Dow Jones' biggest loser today.
Amazon closed 3.4% lower as threats of a recession appeared to dampen consumer appetites for holiday gift buying, either online or in stores.
Dow Jones tech leaders Apple and Microsoft also closed lower.
Tesla stock bounced as high as 3% Monday but then fell back to a loss of 0.2% after Chief Executive Elon Musk's Twitter poll showed that most users want him to "step down as head of Twitter."
Also, Oppenheimer downgraded Tesla to perform from outperform on Monday morning, citing potential brand destruction due to the Twitter controversy.
MercadoLibre Gains On World Cup Victory
MercadoLibre jumped 4.8% Monday after Brazil's Supreme Court temporarily extended welfare payments for low-income Brazilians. MercadoLibre is the largest e-commerce and online payments provider in Latin America. That helped MELI stock rise, along with a World Cup victory for the company's home nation of Argentina.
FedEx slid 1.7% Monday, just one day before its scheduled fiscal Q2 earnings release. The stock is still gaining support from its 50-day line, but just barely. Rebuilding has a long way to go as the company emerges from a disastrous first quarter.
The Innovator IBD 50 ETF dropped 1.7% in Monday's stock market, led lower by solar stock Shoals Technologies and fast-food chain Wingstop. WING shares are below their 50-day line but still within the buy zone from a 148.94 buy point.
Stock Market Movers And Shakers
Vaccine maker Moderna fell 1.8% following a Jefferies upgrade to buy from neutral. The investment bank also raised its price target on Moderna to 275. Jefferies sees upside after positive Phase 2 data from the drugmaker's personalized cancer vaccine for skin cancer patients, and expects positive Phase 3 data from a respiratory vaccine.
MRNA stock is now back in its buy zone from a cup-with-handle base with a buy point of 188.75.
Madrigal Pharmaceuticals scored a win in a particularly tricky field on Monday. Its final-phase study hit both its goals, sending MDGL stock rocketing 268%.
The company tested its treatment in more than 950 patients with nonalcoholic steatohepatitis, or NASH. NASH is a progressive disease that causes liver inflammation called fibrosis.
Aerojet Rocketdyne climbed 1.4% in heavy volume, on news that defense contractor L3Harris will buy the small cap for $4.7 billion. LHX shares dropped 3.4% in heavy volume.
Earnings reports this week include General Mills, Heico, Micron Technology and Dow Jones stock Nike.
Follow Michael Molinski on Twitter @IMmolinski
