Lackluster Action in the Final Days of 2022

U.S. stocks continue to oscillate around the unchanged mark. Volume remains subdued in the waning days of a dismal 2022, with the equity front offering little in terms of news. However, Southwest Airlines continues to be troubled by mass flight cancellations. The economic calendar delivered another drop in pending home sales, while Richmond manufacturing activity unexpectedly moved into expansion territory. Treasury yields are mixed after yesterday's solid gains, and the U.S. dollar is nearly unchanged. Crude oil prices are dropping, and gold is pulling back from Tuesday's rise. Asia finished mixed and Europe is also diverging as the global markets wrestle with China's reopening and uncertainty regarding the ultimate impact of aggressive monetary policy tightening across the globe.

At 10:44 a.m. ET, the Dow Jones Industrial Average is dipping 0.1%, while the S&P 500 Index and the Nasdaq Composite are declining 0.2%. WTI crude oil is dropping $1.95 to $77.58 per barrel, and Brent crude oil is falling $1.79 at $82.89 per barrel. The gold spot price is trading $13.80 lower to $1,809.30 per ounce, and the Dollar Index is little changed at 104.21.

Shares of Southwest Airlines Company (LUV $33) continue to decline amid mass flight cancellations and delays by the airline, exacerbated by the recent powerful winter storm in most parts of the Nation. The Transportation Department stated that they are "concerned by Southwest's unacceptable rate of cancellations and delays and reports of lack of prompt customer service. The Department will examine whether cancellations were controllable and if Southwest is complying with its customer service plan."

Equity news is light in the final days of 2022, which has the S&P 500 tracking for a decline of nearly 20% for the year. Although the index is down for the month of December, it is still solidly higher for the quarter, which would be the first quarterly advance since Q4 2021. However, the Nasdaq is heading toward a Q4 drop. The markets continue to wrestle with the ultimate impact of aggressive Fed actions to try to combat inflation after earlier this month downshifting from a string of four-straight 75-basis point (bp) rate hikes to a 50-bp increase. The deceleration remained unusually aggressive, and the Fed signaled that restrictive policy will likely have to remain in place for longer and at a potentially higher "terminal rate" than expected.

Schwab's Chief Investment Strategist Liz Ann Sonders discusses in our latest, Schwab Market Perspective: When Will the Fed Brake?, how inflation trends are moving in a favorable direction, but the change is likely too slow for the Fed to take its foot off the brake anytime soon.

Pending home sales fall, regional manufacturing output unexpectedly jumps into expansion