Stocks hinted at a potential rebound early Monday, but hopes for a bounce from last week's Fed-induced selloff faded as the session wore on. This week will likely see lower trading volume than usual in the lead up to the Christmas holiday.
As for market participants who were around today, they were hit with another sign of a slowing economy courtesy of the latest housing data, which only elevated fears of a potential recession in 2023. The major market indexes reacted by adding to their already steep December losses.
The National Association of Home Builders (NAHB) this morning said its monthly housing market index, which measures homebuilder confidence, fell to 31 in December from November's reading of 33. That marked the 12 straight month the index has declined, and was the lowest reading since 2012, outside of the pandemic.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"The U.S. housing market is the most interest-sensitive sector of the economy and is reflecting the strong increase in interest rates engineered by the Federal Reserve," says Raymond James economist Giampiero Fuentes. Today's NAHB data confirms "that the U.S. housing market is already in recession, and the expectation is for it to remain there until interest rates start to decline."
Energy was the lone sector that finished higher, eking out a marginal gain as U.S. crude futures climbed 1.2% to $75.19 per barrel. Meanwhile, rate-sensitive communication services (-2.3%) and information technology (-1.3%) stocks suffered significant losses. As such, the tech-heavy Nasdaq Composite led the path lower for the major indexes, shedding 1.5% to 10,546. The broader S&P 500 Index (-0.9% at 3,817) and the blue-chip Dow Jones Industrial Average (-0.5% at 32,757) also closed in the red.
Looking ahead, there are a few notable names on this week's earnings calendar, with quarterly results from FedEx (FDX) and Nike (NKE) due out tomorrow. Earnings from the logistics giant and the athletic footwear and apparel retailer are often seen as a harbinger of activity in the broader economy.
The Best Energy Stocks for 2023
The market needs to mind the Fed. That's according to former Federal Reserve Vice Chair Bill Dudley. "Try as it might, the Federal Reserve can’t seem to break the market’s relative optimism about the outlook for interest rates," Dudley wrote in a weekend opinion piece for Bloomberg. He says that despite the central bank's best efforts at being as clear as it can in its intentions to bring down inflation no matter the cost, "investors aren't getting the message."
This divergence in outlooks could continue to make markets volatile in the new year as investors keep getting disappointed by a hawkish Fed. As such, Ryan Grabinski, investment strategist at institutional brokerage and advisory firm Strategas, says he's "a bit more cautious" heading into the new year, and favors defensive sectors like consumer staples and healthcare.
Grabinski is also upbeat on energy, given its focus on returning capital to shareholders via dividends and stock buybacks. "And while energy probably would fall in the event of a deep recession, so would most sectors," Grabinski adds. "It's just a matter of picking the ones that sell off the least, and we think there are some structural forces in favor of energy." With that in mind, here are the best energy stocks to buy now. Oil and gas prices are likely to cool in the new year, but analysts are targeting major upside for these eight names.
-
‘I Play Pickleball in Retirement.’ Is It HSA-Eligible?Retirement Tax Staying active after you retire may be easier with these HSA expenses. But there’s a big catch.
-
What New Tariffs Mean for Car ShoppersThe Kiplinger Letter Car deals are growing scarcer. Meanwhile, tax credits for EVs are on the way out, but tax breaks for car loans are coming.
-
My Three-Day Rule for Investing: And If it Applies NowStock Market I've seen a lot in my career. Here's what I see now in the stock market.
-
Is It Time to Invest in Europe?Stock Market Europe is being shaken out of its lethargy, militarily and otherwise, by Donald Trump's changes in U.S. policy. Should investors start buying?
-
Fed Leaves Rates Unchanged: What the Experts Are SayingFederal Reserve As widely expected, the Federal Open Market Committee took a 'wait-and-see' approach toward borrowing costs.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are Saying
Federal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
-
Why Is Warren Buffett Selling So Much Stock?Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
-
Fed Cuts Rates Again: What the Experts Are Saying
Federal Reserve The central bank continued to ease, but a new administration in Washington clouds the outlook for future policy moves.
-
If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have TodayGoogle parent Alphabet has been a market-beating machine for ages.
-
Fed Goes Big With First Rate Cut: What the Experts Are Saying
Federal Reserve A slowing labor market prompted the Fed to start with a jumbo-sized reduction to borrowing costs.
