With just two sessions left in 2022, bulls finally got the stock market surge they've been hoping for. The major market indexes staged a hearty rally Thursday, helped by a bad-news-is-good-news reading on the labor market in vapor-thin trading volume.
The proximate cause for Thursday's rally came courtesy of an uptick in weekly jobless claims. The Labor Department reported that initial jobless claims rose by a more-than-expected 9,000 to 225,000 in the week ended Dec. 24. The squeaky tight labor market is a sticking point in the Federal Reserve's efforts to slow the economy and bring down inflation. Any sign that hiring is cooling is considered a step in the right direction for the central bank to ease up on rate hikes.
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Bargain hunters and fund managers looking to add a little window dressing to their year-end returns also helped give equities a lift on Thursday. December is historically one of the strongest months of the year for stocks, but heading into today's trading, the major market indexes were carrying month-to-date losses ranging from 5% to 11%. It was only fitting that some of the day's biggest gainers were stocks that suffered outsized losses this month, including Apple (AAPL, +2.8%), Tesla (TSLA, +8.1%) and Amazon.com (AMZN, +2.9%).
At the close, the Dow Jones Industrial Average was up 1.1% at 33,220, the S&P 500 Index was 1.8% higher at 3,849, and the Nasdaq Composite had gained 2.6% to 10,478.
The Small-Cap Stocks to Watch in 2023
"2022 was an exceptional year and not in a good way," says Brad McMillan, chief investment officer for Commonwealth Financial Network. And what made this year so difficult, he says, were issues that no one foresaw back in January: Sizzling inflation and rising interest rates. McMillan says that among the many lessons this year has taught investors, "perhaps [the] most important is that one year – no matter how good or bad – doesn't achieve or derail your goals."
For investors who've come to realize in 2022 that they prefer a lower-risk, diversified approach, these bear market ETFs or low-volatility ETFs might be a better choice for next year. And for those who've discovered they actually have a higher tolerance for risk? These top small-cap stocks are priced for outsized returns in 2023.
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