Stocks kicked off the final trading month of 2022 in fickle fashion, as traders and investors digested a series of economic reports and Wednesday’s comments by Federal Reserve Chief Jerome Powell.
A reading on U.S. manufacturing activity contracted for the first time since the height of the pandemic, raising the specter of recession in 2023. Apple (AAPL) stock continued to deal with the potential impact to iPhone production from COVID-19 lockdowns and civil unrest in China. Meanwhile, the Fed's preferred measure of inflation showed that prices for core goods and services continued to moderate.
Perhaps the most important piece of macroeconomic news on Thursday came from the Institute for Supply Management. Its gauge of factory activity slipped to 49 in November from 50.2 the previous month. Readings below 50 indicate contraction. The gauge has now declined in five of the past six months, but this was the first time that factory activity actually receded since May 2020.
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Elsewhere, the core personal consumption expenditures price index (the one the Fed pays most attention to) rose 0.2% in October. That was slightly below economists' average estimate. The index, which excludes volatile food and energy prices, rose 5% year over year.
Personal income for October jumped 0.7%, which easily topped the forecast for growth of 0.4% estimate. Personal spending increased 0.8%, which matched projections.
Lastly, market participants continued to process the implications of Fed Chair Jerome Powell's speech to the Brookings Institution. Although the central bank is now expected to raise interest rates by just 0.5% when it meets in mid-December, Powell remained hawkish about where rates will ultimately peak.
All these mixed signals led to a mixed close for the major indexes in a seesaw session on Thursday. The blue-chip Dow Jones Industrial Average fell 0.6% to close at 34,395, while the broader S&P 500 was essentially unchanged (or off less than 0.1%) at 4,076. The tech-heavy Nasdaq Composite, however, gained more than 0.1% to reach 11,482.
The Bottom Line
The bear market rages on, but the best blue-chip stocks never go out of style. Indeed, the Dow – that elite bastion of just 30 blue chips – is now down only 3.4% for the year-to-date on a total return basis (price plus dividends). No wonder a number of Dow stocks make the list of the best stocks to buy for a bear market. Another subset of the Dow, the best Dow dividend stocks, is clobbering the broader market in 2022.
Contrast that with last year, when high-flying growth stocks were all the rage. A number of those names – including Carvana (CVNA) and Rivian (RIVN) – have come crashing down to earth, and now one noted tech bear says former market darling Altassian (TEAM) could even go to $0.
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