Stock Market Today: Stocks Fall on Higher GDP, Ugly Outlooks
Markets tumbled on dour earnings and a GDP revision that gives the Fed more room to hike rates.
Good news was bad news for stocks on Thursday. An upward revision to third-quarter gross domestic product (GDP) revealed a surprisingly resilient U.S. economy.
The market recoiled from this pleasant surprise, however, believing it could give the Federal Reserve more room to raise interest rates. Some dour corporate reports also weighed on shares.
Starting with the economic data, the Bureau of Economic Analysis' third estimate of Q3 GDP showed that the U.S. economy was in better shape over the July to September period than previously thought. Real GDP, which is adjusted for inflation, increased at an annual rate of 3.2% in the third quarter, up from a prior estimate of 2.9%. The Q3 data also mark a sharp reversal from the second quarter, in which real GDP contracted 0.6%.
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 Fed, however, is looking to cool down the economy in order to stamp out the worst inflation in four decades. Any data that tends to be supportive of higher interest rates for longer is something the market does not want to see.
"Given that almost 60% of GDP is derived from services revenue, it should not come to a huge surprise that GDP continues to beat on the upside," says David Wagner, portfolio manager at Aptus Capital Advisors. "This doesn't make the Fed's job any easier, as it continues to show the strength of the consumer in the face of higher inflation."
Some downbeat corporate news also hurt the major benchmarks on Thursday. Micron Technology (MU, -3.4%), the largest U.S. manufacturer of memory chips, announced a range of cost-cutting measures amid the worst glut in a decade for semiconductor firms. The chipmaker said it will lay off 10% of its workforce, as current-quarter revenue is forecast to decline by more than management or analysts had forecast. Micron also projected a wider-than-expected loss in the current quarter.
Adding to the market's stress, shares in CarMax (KMX, -3.7%) fell after the auto dealer missed Wall Street's already pessimistic third-quarter revenue and profit forecasts.
At the closing bell, the blue-chip Dow Jones Industrial Average fell 1.1% to finish at 33,027, while the broader S&P 500 declined 1.4% to 3,822. The tech-heavy Nasdaq Composite tumbled 2.2% to close at 10,476.
December, which is historically the second-best month of the year for stocks, has been a huge disappointment in 2022. Since 1928, the S&P 500 has delivered an average price gain in December of 1.4%, per Yardeni Research. This year, the index is off 6.3% for the month-to-date.
Thankfully, traders have a powerful historical trend starting tomorrow, and it might just help salvage some folks' returns.
The Santa Claus Rally, which officially kicks off Friday, is upon us.
For the uninitiated, the Santa Claus Rally covers the final five trading days of the year and the first two trading days of the new year. Few periods can beat the SCR for performance, notes Ryan Detrick, chief market strategist at Carson Group.
"No seven-day combo is more likely to be higher (up 79.2% of the time), and only two combos have a better average return for the S&P 500 than the 1.33% average return during the official Santa Claus Rally period," Detrick says.
Although the Santa Claus Rally might help traders and tacticians add a little window dressing to their 2022 and early 2023 returns, most investors are generally better served by maintaining longer horizons.
Time to Look Towards 2023
As we turn the page on an annus horribilis for equities, it's time to get back to basics.
Investors rebalancing their portfolios for 2023 shouldn't forget that the best blue-chip dividend stocks – and especially the best Dow dividend stocks – never go out of style. It's also critical that investors embrace diversification. Exchange-traded funds (ETFs) – from the best high-yield ETFs to the best bear-market ETFs – will do this automatically for you.
And for folks who like to pick their own stocks, start by scouring everything from the best small-cap stocks to the best growth stocks to the Dogs of the Dow for 2023 for a wealth of potentially market-beating ideas.
Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.
A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.
Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.
In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.
Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.
Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.
-
Strategies to Optimize Your Social Security Benefits
To maximize what you can collect, it’s crucial to know when you can file, how delaying filing affects your checks and the income limit if you’re still working.
By Jason “JB” Beckett Published
-
Don’t Forget to Update Beneficiaries After a Gray Divorce
Some states automatically revoke a former spouse as a beneficiary on some accounts. Waivers can be used, too. Best not to leave it up to your state, though.
By Andrew Hatherley, CDFA®, CRPC® Published
-
Stock Market Today: Dow Slips After Travelers' Earnings Miss
The property and casualty insurer posted a bottom-line miss as catastrophe losses spiked.
By Karee Venema Published
-
Stock Market Today: Stocks Stabilize After Powell's Rate-Cut Warning
The main indexes temporarily tumbled after Fed Chair Powell said interest rates could stay higher for longer.
By Karee Venema Published
-
Stock Market Today: Stocks Reverse Lower as Treasury Yields Spike
A good-news-is-bad-news retail sales report lowered rate-cut expectations and caused government bond yields to surge.
By Karee Venema Last updated
-
Stock Market Today: Nasdaq Leads as Magnificent 7 Stocks Rise
Strength in several mega-cap tech and communication services stocks kept the main indexes higher Thursday.
By Karee Venema Published
-
Stock Market Today: Stocks Tumble After a Hot Inflation Print
Equities retreated after inflation data called the Fed's rate-cut plans into question.
By Dan Burrows Published
-
Stock Market Today: Stocks End Mixed Ahead of Key Inflation Reading
Equities struggled before tomorrow's big Consumer Price Index report.
By Dan Burrows Published
-
Stock Market Today: Stocks Closed Mixed in Choppy Trading
Volatility returned as market participants adjusted their expectations for rate cuts.
By Dan Burrows Published
-
Stock Market Today: Stocks Rally After Blowout Jobs Report
Stocks soared into the weekend as investors brushed off strong payrolls data and lowered rate-cut expectations.
By Dan Burrows Published