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Wall Street starts the year with a dip; Apple, Tesla shares drag

Wall Street starts the year with a dip; Apple, Tesla shares drag

A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, Dec 14, 2022. (File photo: Reuters/Andrew Kelly)

Wall Street's main indexes closed lower on the first trading day of 2023 with the biggest drags from Tesla and Apple, while investors worried about the Federal Reserve's interest-rate hiking path as they awaited minutes from its December meeting.

Shares in electric vehicle maker Tesla closed down 12 per cent after hitting their lowest level since August 2020 and put pressure on the consumer discretionary sector following a miss on Wall Street estimates for fourth-quarter deliveries.

Apple shares sank 3.7 per cent, with the iPhone maker hitting its lowest level since June 2021, after a report from Nikkei Asia pointed to weaker demand. In addition, an analyst downgraded their rating of the stock due to production cuts in COVID-19-hit China.

The energy sector, which logged stellar gains in 2022, closed down 3.6 per cent in the year's first trading day as oil prices fell on bleak business activity data from China and concerns about the global economic outlook.

The main US stock indexes in 2022 showed their steepest annual losses since 2008 following the Fed's fastest pace of rate hikes since the 1980s to stamp out decades-high inflation.

"2022 was a terrible year for equity markets. Some of the reasons for that haven't dissipated because we turned the calendar," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. "There's still elevated anxiety, uncertainty about the Fed and inflation. Until there's clarity on that, it's going to be tough to make any upside headway in equity markets."

Given Apple and Tesla's clout in the market, James also cited specific concerns about them for broader S&P weakness on Tuesday (Jan 3).

The Dow Jones Industrial Average fell 10.88 points, or 0.03 per cent, to 33,136.37; the S&P 500 lost 15.36 points, or 0.40 per cent, to 3,824.14; and the Nasdaq Composite dropped 79.50 points, or 0.76 per cent, to 10,386.99.

The S&P 500 had shed 19.4 per cent in 2022, marking a roughly US$8 trillion decline in market capitalisation, while the Nasdaq fell 33.1 per cent, dragged down by growth stocks.

Among the S&P 500's 11 major sectors, behind energy, technology was the second biggest decliner, losing 1 per cent, with Apple hastening the decline as it ended the day with a market valuation below US$2 trillion for the first time since March 2021.

Tesla's biggest daily percentage drop since September 2020 helped make the consumer discretionary index the S&P's third weakest sector on the day with a 0.6 per cent drop.

The benchmark's biggest gainer on the day was communications services, with Facebook parent Meta Platforms leading the advancers there with a gain of 3.7 per cent.

Investors on Wednesday will closely monitor the minutes of the Fed's December policy meeting, when the central bank raised interest rates by 50 basis points after four straight 75 basis points hikes and signaled rates could stay higher for longer.

Other economic data due this week includes the ISM manufacturing report, also on Wednesday, and December's jobs report on Friday.

Weakness in the labor market could give the Fed a reason to ease its monetary policy tightening, but the data so far has shown that market remains tight despite rate hikes.

Money market participants see a 68 per cent chance the Fed will raise the benchmark rate by 25 basis points to 4.5 per cent to 4.75 per cent in February, with the rates peaking at 4.98 per cent by June.

Advancing issues outnumbered declining ones on the NYSE by a 1.42-to-1 ratio; on Nasdaq, a 1.20-to-1 ratio favored advancers.

The S&P 500 posted one new 52-week high and five new lows; the Nasdaq Composite recorded 92 new highs and 58 new lows.

On US exchanges 10.618 billion shares changed hands, marking an uptick from the previous week's lower volume due to the holiday season. It compared with the 10.799 billion-share average for the last 20 trading days.

Source: Reuters/lk


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