US Stocks Stare At More Losses In Final Trading Session Of A Dismal Year — Analyst Sees Further Weakness Ahead

Trading in the U.S. index futures suggests that stocks could reverse course on Friday following a scintillating rally in the previous session. A regional manufacturing reading, bond yields and the direction of oil price are among the catalysts that can impact trading in the final trading session of the year.

U.S. stocks advanced solidly on Thursday, as the year-end rally many had been hoping for materialized in the penultimate session of the year. The major indices gap opened higher and advanced steadily till early afternoon trading. Thereafter, they moved sideways before closing the session notably higher. In the process, the Nasdaq Composite recovered from a fresh bear market bottom it had hit in the previous session.

Stocks across sectors advanced on Thursday, with the beaten-down tech and consumer discretionary stocks outperforming the rest.

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Some of the strength may also have to do with the weekly jobless claims report that rose from the previous reporting week and a slight dip in the 10-year U.S. Treasury note yield.

“However, unemployment claims are still too low to impact Fed policy, so a February 1st key interest rate hike remains likely due to rising Treasury bond yields this week,” said fund manager Louis Navellier.

The U.S. market, as represented by the S&P 500 Index, is on track to finish the year with a loss of over 19%. The future continues to be tense. JPMorgan analysts expect the S&P 500 Index to retest the 2022 lows in the first half of 2023, as the Fed over-tightens into weaker fundamentals. “This sell-off combined with disinflation, rising unemployment and declining corporate sentiment should be enough for the Fed to start signaling a pivot, pushing the S&P 500 to 4,200 by year-end 2023,” they added.

Here’s a peek into index futures trading:

In premarket trading on Friday, the SPDR S&P 500 ETF Trust SPY fell 0.30% to $382.29, and the Invesco QQQ Trust QQQ slipped 0.22% to $265.85, according to Benzinga Pro data.

On the economic front, the ISM Chicago is scheduled to release its regional business barometer index for December. The consensus estimate calls for an improvement in the index from 37.2 in November to 40.

Stocks In Focus:

• Chinese e-commerce retailers Alibaba Group Holding Limited BABA, JD.com Inc. JD and Pinduoduo Inc. PDD were all notably lower in premarket trading.
• Netflix Inc. NFLX was pulling back after Thursday’s 5%+ rally achieved on the back of a double upgrade.
• Tesla Inc. TSLA rose moderately after the 8%+ rally in the previous session.

Commodities, Other Global Markets: Crude oil futures, which scraped through and ended Thursday’s session with a marginal gain, have headed southward. A barrel of WTI-grade crude oil traded down 0.63% at $77.92.

Oil was on a boil in early 2022 as the Russia-Ukraine war threatened supply disruption. The black gold rose to a high of over $130-a-barrel in early March before pulling back. It is on track to close the year with a gain of about 3.5%.

The yield on the 10-year U.S. treasury rose 0.013 percentage points to 3.848% compared to the 1.5210% at which it ended in 2021.

The major Asia-Pacific markets ended Friday’s session modestly higher, as the looming uncertainties countered the positive sentiment generated by the strong close by Wall Street overnight. The South Korean market remained closed for the day. European stocks opened Friday’s session lower and have continued to languish below the unchanged line in late morning trading.

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