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S&P 500 closes out dismal year with worst loss since 2008

Wall Street capped a quiet day of trading with more losses Friday, as it closed the book on the worst year for the S&P 500 since 2008.

The benchmark index finished with a loss of 19.4% for 2022 — just its third annual decline since the financial crisis 14 years ago and a painful reversal for investors after the S&P 500 notched a gain of nearly 27% in 2021. The Nasdaq composite, with a heavy component of technology stocks, racked up an even bigger loss of 33.1%.

The Dow Jones Industrial Average, meanwhile, posted an 8.8% loss for 2022.

Stocks struggled all year as inflation put increasing pressure on consumers and raised concerns about economies slipping into recession. Central banks raised interest rates to fight high prices. The Federal Reserve’s aggressive rate hikes remain a major focus for investors as the central bank walks a thin line between raising rates enough to cool inflation, but not so much that they stall the U.S. economy into a recession.

The Fed’s key lending rate stood at a range of 0% to 0.25% at the beginning of 2022 and will close the year at a range of 4.25% to 4.5% after seven increases. The U.S. central bank forecasts that will reach a range of 5% to 5.25% by the end of 2023. Its forecast doesn’t call for a rate cut before 2024.

Rising interest rates prompted investors to sell the high-priced shares of technology giants such as Apple and Microsoft as well as other companies that flourished as the economy recovered from the pandemic. Amazon and Netflix lost roughly 50% of their market value. Tesla and Meta Platforms, the parent company of Facebook, each dropped more than 60%, their biggest-ever annual declines.

Russia’s invasion of Ukraine worsened inflationary pressure earlier in the year by making oil, gas and food commodity prices even more volatile amid existing supply chain issues. Oil closed Friday around $80, about $5 higher than where it started the year. But in between oil jumped above $120, helping energy stocks post the only gain among the 11 sectors in the S&P 500, up 59%.

China spent most of the year imposing strict COVID-19 policies which crimped production for raw materials and goods, but is now in the process of removing travel and other restrictions. It’s uncertain at this point what impact China’s reopening will have on the global economy.

The Fed’s battle against inflation, though, will likely remain the overarching concern on Wall Street in 2023, according to analysts. Investors will continue searching for a better sense of whether inflation is easing fast enough to take pressure off of consumers and the Fed.

If inflation continues to show signs of easing, and the Fed reins in its rate-hiking campaign, that could pave the way for a rebound for stocks in 2023, said Jay Hatfield, CEO of Infrastructure Capital Advisors.

“The Fed has been the overhang on this market, really since November of last year, so if the Fed pauses and we don’t have a major recession we think that sets us up for a rally,” he said.

There was scant corporate or economic news for Wall Street to review Friday. That, plus the holiday shortened week, set the stage for mostly light trading.

The S&P 500 fell 9.78 points, or 0.3%, to finish at 3,839.50. The index posted a 5.9% loss for the month of December.

The Dow dropped 73.55 points, or 0.2%, to close at 33,147.25. The Nasdaq slipped 11.61 points, or 0.1%, to 10,466.48.

Tesla rose 1.1%, as it continued to stabilize after steep losses earlier in the week. The electric vehicle maker’s stock plummeted 65% in 2022, erasing about $700 billion of market value.

Southwest Airlines rose 0.9% as its operations returned to relative normalcy following massive cancellations over the holiday period. The stock still ended down 6.7% for the week.

Small company stocks also fell Friday. The Russell 2000 shed 5 points, or 0.3%, to close at 1,761.25.

Bond yields mostly rose. The yield on the 10-Year Treasury, which influences mortgage rates, rose to 3.88% from 3.82% late Thursday. Although bonds typically fair well when stocks slump, 2022 turned out to be one of the worst years for the bond market in history, thanks to the Fed’s rapid rate increases and inflation.

Several big updates on the employment market are on tap for the first week of 2023. It has been a particularly strong area of the economy and has helped create a bulwark against a recession. That has made the Fed’s job more difficult, though, because strong employment and wages mean it may have to remain aggressive to keep fighting inflation. That, in turn, raises the risk of slowing the economy too much and bringing on a recession.

The Fed will release minutes from its latest policy meeting on Wednesday, potentially giving investors more insight into its next moves.

The government will also release its November report on job openings Wednesday. That will be followed by a weekly update on unemployment on Thursday. The closely-watched monthly employment report is due Friday.

Wall Street is also waiting on the latest round of corporate earnings reports, which will start flowing in around the middle of January. Companies have been warning investors that inflation will likely crimp their profits and revenue in 2023. That’s after spending most of 2022 raising prices on everything from food to clothing in an effort to offset inflation, though many companies went further and actually padded their profit margins.

Companies in the S&P 500 are expected to broadly report a 3.5% drop in earnings during the fourth quarter, according to FactSet. Analysts expect earnings to then remain roughly flat through the first half of 2023.

U.S. stock markets will be closed Monday in observance of the New Year’s Day holiday.

 

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LIFE & WORK

A recession might be coming. Here’s what it could look like

Slowcession? Richcession? Or just recession?

Whether in the supermarket aisle, or the corporate suite, a lot of people are expecting a recession – even if there’s no certainty there will be one at all.

Survey after survey shows fears of recession are high. It’s easy to see why.

The Federal Reserve is increasing interest rates in the most aggressive fashion since the early 1980s as it races to bring down inflation. And a recession is often the consequence when the central bank starts raising borrowing costs.

The prospect of recession is certainly scary. But even if the U.S. is headed for one, it’s worth keeping in mind that no two recessions are alike.

A recession could be blip-ish, like the short, pandemic-induced one in 2020, or more like the economic tsunami that followed the 2008 housing meltdown.

So, from recession with a small r to the so-called soft landing, here are some of the current predictions of what kind of economic slowdown the U.S. could be facing.

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LIFE & WORK

Brad Inman at Connect New York: 2023 is a year for metamorphosis

The suspect in the overnight fatal shooting that left three people dead in Yakima, Washington, has died after taking his own life, the Yakima Police Chief said Tuesday.

Police were pointed to the suspect’s location after getting a 911 call from a woman who had lent the suspect her phone near a Target store in Yakima, Police Chief Matt Murray said in a Tuesday evening news conference.

Officers responded immediately and, within minutes, arrived at the scene, according to the chief.

The suspect apparently shot and killed himself and that was prior to officers’ arrival. There were officers who heard the shots, but no one saw him actually do that,” Murray said.

Officials tried to save his life but he was later pronounced dead, according to Murray, who had earlier Tuesday indicated that the suspect had been taken into custody.

The chief said officials will need to go through the formal process of identifying the suspect, “but I can say with pretty good confidence that we believe that this is the person who was involved.”

The police department had earlier identified the “presumed homicide suspect” as Jarid Haddock, 21, a Yakima County resident, according to a Facebook post.

Police earlier had a house surrounded where they thought the suspect was when they learned he was in the area of a Target store in Yakima, the chief said.

There, the suspect asked a woman to borrow her phone and called his mom and “made several incriminating statements including ‘I killed those people,’” Police Chief Matt Murray said.

The woman heard the man say he was going to kill himself and called 911, according to Murray.

“I listened to that call. It’s pretty harrowing, and I have to really thank her again because she was very courageous in getting us there,” the chief said.

Murray said responding officers founding the man near a marijuana retailer, but did not provide information on whether he was inside or outside the business where he allegedly shot himself.

The suspect had “a large amount of ammunition” and a firearm when officers found him, the chief said.

Murray told Tuesday that the suspect pulled into the ARCO/ampm gas station and “tried to get into the lobby,” but found the doors were locked.

“He then walked across the street to the Circle K,” Murray said. “As he’s walking into the store he pulls out his gun and there are two people getting food and he shoots them.” Both people died, Murray said.

The suspect then walked out of the store and shot another person, who also died.

Murray said the suspect went back across the street to the ARCO/ampm gas station and shot into a car and drove off.

“We later learned it was his car and that he shot the window of that car in order to get inside because he had locked his keys in the car,” Murray said.

The motive behind the shooting remains under investigation but Murray said the attack appeared “very much random.”

“There was no interaction between him and people,” the chief said. “They were just sitting there getting food and got surprised by this person who came in and … literally as he was opening the door, he started shooting these people.”

Justin Bumbalogh, who was working at Elite Towing and Recovery, next door to the Circle K, said he was half asleep when he heard gunshots. Police said the shooting occurred around 3:30 a.m. local time.

 

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LIFE & WORK

COVID 2023: Do We Know Where We’re Going?—Virtual Lecture, Feb. 7

Michael Osterholm, author of the New York Times Best-Selling “Deadliest Enemy: Our War Against Killer Germs”, on the challenges of the mutating virus.

University of Minnesota Professor Michael T. Osterholm will deliver “The COVID-19 Pandemic: Do We Know Where We Are Going?”—the first Spring 2023 Bentson Dean’s Lecture—on Tues., Feb. 7, at 6:00 p.m. EST.

Osterholm, McKnight Presidential Endowed Chair in Public Health and the director of the Center for Infectious Disease Research and Policy at the University of Minnesota, will discuss what the ever-mutating COVID virus will mean for the future of the pandemic: When will it end? Will it end? Will there be a return to “normal”? The talk will focus on current mutations and data as of February 2023.

Osterholm, appointed to then-President-elect Joe Biden’s Transition COVID-19 Advisory Board in November 2020, is the author of the New York Times best-selling 2017 book, Deadliest Enemy: Our War Against Killer Germs, which details the most pressing infectious disease threats of our day and lays out a nine-point strategy on how to address them.

Osterholm served for 24 years (1975-1999) in various roles at the Minnesota Department of Health, including the last 15 as state epidemiologist. He has led numerous investigations of outbreaks of international importance, including foodborne diseases, the association of tampons and toxic shock syndrome, and hepatitis B and HIV in healthcare settings. Osterholm was also the principal investigator and director of the National Institutes of Health-supported Minnesota Center of Excellence for Influenza Research and Surveillance (2007-2014) and chair of the Executive Committee of the Centers of Excellence Influenza Research and Surveillance network.

An RSVP is required by visiting the event page. Zoom coordinates will be sent to attendees the day of the event. For more information, email cas.events@nyu.edu or call 212.998.8100.

Free and open to the public, the Bentson Lectures have, for nearly 10 years, showcased current and visiting faculty and other guests. Funded by the Bentson Family Foundation, recent Bentson Lecturers have included NYU Professor Kwame Anthony Appiah, the New York Times “Ethicist” columnist, on “The Ethics of Work”; NYU Anthropology Professor Rayna Rapp on “The Implications of the Growing role of Genetic Testing”; Karen Adolph, professor of psychology and neuroscience at NYU, on early childhood development in her lecture “Learning to Move and Moving to Learn”; and Brooke Kroeger, an NYU journalism professor emeritus, on “What We Can Learn about Allyship Today from ‘Suffragents’.”

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