Wall Street closed slightly lower on Friday, the last trading day of the year. Investor mood was grim as they looked at the coming months skeptically, with no signals about policy loosening coming from the Fed yet. All three major indexes ended in the red.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 0.2% or 73.55 points to close at 33,147.25 points. Nineteen components of the 30-stock index ended in negative territory, while 11 ended in positive.

The S&P 500 lost 0.3% or 9.78 points to close at 3,839.50 points. Nine of the 11 broad sectors of the benchmark index ended in negative territory. The Utilities Select Sector SPDR (XLU), the Real Estate Select Sector SPDR (XLRE) and the Materials Select Sector SPDR (XLB) went down 1%, 0.9% and 0.7%, respectively, while the Energy Select Sector SPDR (XLE) progressed 0.6%.

The tech-heavy Nasdaq dipped 0.1% or 11.61 points to finish at 10,466.48 points.

The fear-gauge CBOE Volatility Index (VIX) increased 1.1% to 21.67. A total of 8.5 billion shares were traded on Friday, lower than the last 20-session average of 10.8 billion. Decliners outnumbered advancers on the NYSE by a 1.50-to-1 ratio. On Nasdaq, a 1.03-to-1 ratio favored declining issues.

Last Trading Day Ends With a Whimper

Trading activity was sparse and low on the last trading day in 2022, as investors remained apprehensive about the direction the Fed was taking the economy toward. Friday capped one of the worst years seen in the market in the last one and a half decades, the worst since 2008, primarily pulled down by oil and commodity prices rising as a fallout of the Ukraine situation and the resultant policy tightening by the Fed in its bid to curb inflation. Expectations are that interest rates will continue to rise in the near term until there are concrete signs that inflation is coming down at a rapid pace. But with the Fed target rate remaining at a 2% inflation, tough, austere policies may continue for the time being without an end in sight.

The war escalating in Ukraine and the covid situation in China have also kept investors jittery in the week that ended the year. Utilities and Real Estate were the worst-hit sectors for the day. Consequently, shares of American Electric Power Company, Inc. (AEP Quick QuoteAEP - Free Report) and Brookfield Corporation (BN Quick QuoteBN - Free Report) fell 1.1% and 1.8%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Weekly Round Up

The three most widely followed indexes declined on Friday to close out a slightly losing last week of 2022. The tech-heavy Nasdaq Composite fell 0.3% for the week, while the S&P 500 and the Dow Jones Industrial Average lost 0.1% and 0.2%, respectively. A general grim mood about continuing interest rate hikes was somewhat pared by good news from the labor market showing rising jobless claims, and demand concerns over the energy market with covid cases increasing in China met its match in the strong domestic demand for crude oil in the United States. The result was a week that more or less ended flat.

Monthly Round Up

December was especially disappointing for investors as a Santa Claus rally was expected in the holiday season to cap off what has been a horrid year. But the rally did not arrive to boost the market as mixed economic data, especially in the labor market, failed to deter the Fed from signaling further interest rate hikes going forward. It did, however, oversee the end to a streak of 75 bps rate hikes and settled down to a 50 bps one in the Fed December meet. The Nasdaq, the S&P 500, and the Dow fell 8.7%, 5.9% and 4.2% for the month.

Quarterly Round Up

On a quarterly basis, the S&P 500 and the Dow grew 7.1% and 15.4% while the tech-heavy Nasdaq declined 1% in fourth-quarter 2022. Even as economic indicators suggested that Fed policies were starting to take effect, mega-cap growth stocks continued to decline as recession loomed large on the economy, thus bearing down on the Nasdaq. The two other major indexes reaped the benefits of a relief rebound, with the general consensus being that the worst of the inflation was behind us.

Half-Yearly Round Up

With headline inflation peaking at 9.1% in June, the market was in a buy-the-dip damage control mode for the rest of the year as rebound rallies punctuated its business. Even as fear of an impending recession continued to cast a pall over Wall Street, stocks made a comeback, with the Fed starting to send somewhat dovish signals and ending its unprecedented streak of 75 bps rate hikes. China relaxing its stringent covid measures and opening up for business also helped. Nasdaq fell 5.1% for the period, but the S&P 500 and the Dow grew 1.4% and 7.7% for the quarter. This was quite a comeback considering the fact that in the first half, the Dow was hovering in the correction zone, while the S&P 500 and the Nasdaq were in the bear market territory.

Yearly Round Up

Wall Street closed its worst year since 2008 on Friday. Situations in Ukraine and China and the resultant price pressures on the global markets have led to this big meltdown. In the year, the S&P 500 declined 19.4% and is in the bear market territory, falling 20% below its record high. The tech-heavy Nasdaq Composite is down 33.1%, with mega-cap growth stocks getting a beatdown. Dow fared the best with a “modest” 8.8% fall compared to others. All eyes will be on the Fed in the days and weeks to come and the direction it gives to the economy. Its failure to achieve a soft landing might have cataclysmic repercussions for the market and the economy in general.

Economic Data

Chicago Purchasing Manager’s Index increased to 44.9 for December. The unrevised numbers for November remained at 37.2.