Stocks plunge, and treasury yields gain on the last trading day of 2022
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Friday was the last trading day for financial markets in 2022. Wall Street equity indexes lost value during the day, but Treasury yields reported a slight gain. Oil futures are also up as investors braced for the start of 2023 and the surprises the year might hold, given the interest hikes imposed by the US Federal Reserve.
Stocks drop as treasury yields gain
As investors wait for the next trading day in the new year, there are still worries about the economic growth in 2022 and whether the Fed will ease the interest rate hikes and increase borrowing.
The interest rate hikes have strengthened the US dollar against other global currencies. On Friday, the US dollar reported a slight drop, but it is on the way to reporting an 8% gain this year alone. This increase will be the highest annual percentage increase made by the Fed since 2015.
Bryce Doty, a senior portfolio manager at Sit Fixed Income Advisors based in Minneapolis, commented on the performance of financial markets in 2022 and what was expected in 2023. Doty noted that bond investors did not finish 2022 on a positive note and were looking for a better performance in 2023.
However, Doty has predicted that stocks will continue struggling with declining economic activity. Moreover, the loss of inflated earnings from the high inflation levels would continue affecting the stock markets. On the other hand, bonds would continue generating a decent income with the possibility of a price gain as yields start dropping from their peak.
The ten-year notes have also increased by 4.7 basis points to 3.882% compared to the 3.835 reported the previous day. More gains were also seen in the 30-year bond and the 2-year note.
However, the stock markets have not performed well. The stocks have struggled amid a decline in main Wall Street indexes, including Nasdaq. The Dow Jones Industrial Average and the S&P 500 indexes have also plunged as stocks struggle to close the year on a high note.
Stock market remains bearish this year
The stock market has remained bearish for most of this year. The S&P 500 index is on the path to dropping by around 20% in 2022. Nasdaq and the Dow Jones index are also headed to reporting a 33% and a 9% drop this year. The MSCI world equity index is headed for an around 20% annual decline, the largest drop seen in the index in 14 years.
European stocks are also bearish today amid concerns over the rising COVID cases in China, which have triggered concern over the status of the global economy. Since China got rid of its “zero-COVID policy,” the health system in the country has been under pressure because of the rising infection cases.
As global stocks dropped, some currencies, such as the US dollar, have had a good year. The dollar is up by over 8% this year. However, in the recent quarter, the dollar’s value has dropped by over 7%.
