U.S. stocks struggle for direction after markets dive to 5-week low – MarketWatch

U.S. stocks booked a fourth straight session of losses on Monday, extending back-to-back weekly losses to finish at their lowest levels since early November, as recession fears dominated Wall Street.
On Friday, the S&P 500 logged a 2.1% weekly loss and ended at its lowest level since Nov. 9. The Dow Jones Industrial Average saw a 1.7% weekly fall and the Nasdaq dropped 2.7%.
Investors have become increasingly concerned about a recession many feel is all but inevitable given the determinedly hawkish stance of major monetary authorities, such as the Federal Reserve and European Central Bank, which continue to battle high inflation.
Read: The stock market is sliding because investors now fear recession more than inflation
Last week, alongside the Bank of England, the two central banks increased interest rates by 50 basis points to multiyear peaks and stressed that borrowing costs would likely go higher for longer than the market had hoped.
“The Fed and ECB seem determined to leave a lump of coal in everyone’s stockings this holiday season,” said Stephen Innes, managing partner at SPI Asset Management.
“With economic data undershooting expectations, it’s not a stretch to think investors may shift their focus from inflation and the Fed to the growing impact that the Fed’s actions are likely to have on the economy in 2023,” Innes said.

Analysts noted that investors had shifted from believing that bad news on the economy was good news for both bonds and equities — because it discouraged central banks from being too aggressive in their policy tightening — and were now taking bad economic news for what it is, a scenario that may damage company earnings.

The soft performance on Wall Street in previous sessions and worries about a global slowdown saw Asian stock markets fall back on Monday, with China’s Shanghai Composite CN:SHCOMP finishing down by 1.9% amid more concerns about spiking COVID infections in the world’s most populous nation.

It may pay to take a long view on China as it relaxes its COVID curbs, which have been seen as a brake on consumption in the world’s second-largest economy, George Young, portfolio manager with Villere & Co., said in a phone interview.

Villere & Co. expects mining company Freeport-McMoRan Inc. FCX, for example, to benefit from a renewed pickup in copper demand as China’s economy eventually gets traction, Young said. Freeport looks set to see a down year in the near term, but is set for 40% earnings growth three years out, predicated on China’s comeback, he said.

In data released on Monday, the National Association of Home Builders’ monthly confidence index fell two points to 31 in December. It’s the 12th month in a row that the index has fallen. Outside of the pandemic, the December reading of 31 is the lowest level since mid-2012.

Walt Disney Co. DIS, +1.18%, Nike Inc. NKE, -0.39% and Microsoft Corp. MSFT, +0.77% were the biggest decliners in the Dow Jones Industrial Average.
— Jamie Chisholm contributed to this article. 
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Vivien Lou Chen is a Markets Reporter for MarketWatch. You can follow her on Twitter @vivienlouchen.

William Watts is MarketWatch markets editor. In addition to managing markets coverage, he writes about stocks, bonds, currencies and commodities, including oil. He also writes about global macro issues and trading strategies. During his time at MarketWatch, Watts has served in key roles in the Frankfurt, London, New York and Washington, D.C., newsrooms.
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