Double Digit Losses on Wall Street In 2022, Omicron Variant Rapidly Spreads In U.S.

Barry Adams
30 Dec, 2022
New York City

Benchmark indexes declined on the final trading day of 2022 and indexes posted the worst annual losses since 2008. 

The Federal Reserve dominated market sentiment in 2022 and seven rate hikes in the year crushed growth stocks, dragged down indexes and halted three year advances. 

The pace of rate hikes and the nature of economic slowdown are expected to dominate market sentiment in the first quarter of 2023. 

Moreover, investors are worried that the current market valuations do not reflect higher rates and weakening earnings trends. 

Stocks are not expected to rebound until the Fed pivots or a recession arrives and supply chain disruptions ease.  

Worries of China virus flare-up are added to the growing list of headwinds faced by global markets. 

U.S. scientists and Center for Disease Control and Prevention are also closely watching the rapidly spreading mutation omicron XBB.1.5. 

Viruses in the XBB omicron family are highly immune evasive and strains with multiple variants have potential to render Covid-19 vaccine and omicron booster less effective and bind better to cells. 

 

China Virus Flare-up Worries 

Caution prevailed in trading on the global economic slowdown worries and the rapid spread of Covid-virous in China.

Covid infections are rapidly spreading in China and in the next two weeks the  pace of spread is expected to accelerate as people begin to travel back to the countryside  ahead of the Lunar New Year. 

At least 250 million or 25 crore people are expected to travel from fifty largest cities to reunite with their families in villages.

Moreover, Chinese citizens will be permitted to travel to foreign destinations in the next two weeks as well, stoking fears of worldwide spread of the virus and spawning new variants. 

 

U.S. Indexes In Review 

Benchmark indexes dropped after multiple rate hikes raised the prospect of economic slowdown and the indexes fell the most since 2008 when the S&P 500 fell 38.5%. 

The S&P 500 index declined 0.3% to 3,839.50 and the Nasdaq Composite index dropped 0.1% to 10,466.48. 

In 2022 the S&P 500 index fell 20% through Thursday and the Nasdaq Composite index dropped 33.9%. 

Crude oil increased $2.18 to $80.58 a barrel and natural gas eased 12 cents to $4.48 a thermal unit. 

For 2022, crude oil increased 7.6% and scaled back from the high above $119 a barrel on March 8 and dropped to the low of $71.18 on December 9. 

The yield on 2-year Treasury notes increased to 4.48%, 10-year Treasury notes edged higher to 3.88% and 30-year Treasury bonds inched up to 3.97%. 

 

European Markets Post Worst Losses Since 2018 

European markets closed down on the final trading day of 2022 with lingering worries of economic slowdown and the negative impact of future rate hikes dominating market sentiment. 

The rapid spread of Covid virus in China and the rising potential of global spread of the virus also hovered the market sentiment. 

Energy crisis in the region and the European Central Bank actions dominated market sentiment in 2022. 

With war in Ukraine far from over, energy prices soared multi-fold and natural gas prices surged to record highs and uncertainty about the supply chain are not likely to go away in 2023. 

The DAX index fell 1.1% to 13,923.59, the CAC-40 index decreased 1.1% to 6,502.49 and the FTSE 100 index dropped 0.8% to 7,451.74. 

In 2022, the DAX index declined 13.1%, the CAC-40 index fell 10%, the Swiss benchmark SMI index dropped 17.1% and the FTSE 100 index eased 0.7%. 

The DAX index and the CAC-40 index posted their worst decline since 2018 and the SMI index fell the most since 2008. 

Among the most active European bourse, Turkey index was the lone gainer with a surge of 185.9% after inflation hovered near 86%.  

Most European markets posted double-digit losses in 2018 after political turmoil in the U.S. and the U.S.' imposition of tariff on China imports and central banks hiking rates. 

In 2018, the U.S. Federal Reserve raised its key lending rate to 2.4% from 1.4% in four equal increments.

 

Asian Markets Closed Down In 2022

Asian market indexes closed higher on the final trading day of 2022.

The Nikkei index was nearly unchanged and closed at 26,094.50  and fell 11% in 2022. The Nikkei posted its first annual decline in four years.

The Shanghai Composite index increased 0.5% to close at 3,089.26 and dropped 15% in 2022. The index fell in 2022 after advancing in the previous two years.

The Hang Seng index advanced 0.2% to 19,781.41 and fell 15% in 2022 and extended annual losses for the third year in a row.

The Hang Seng index has fallen about 30% in the last three years.