Markets End Lower in the Final Trading Session of 2022

U.S. equities closed out 2022 in the red, and all three major indexes registered solid losses on a yearly basis. The stock market posted its worst yearly decline since 2008. Trading remained subdued in the final days of the year as volumes continued to be on the lighter side. Equity news remained in short supply, but Southwest Airlines continued to be in the headlines after saying its latest troubles will affect Q4 results. The economic calendar was also relatively quiet, with today's lone report showing a surprising rebound in manufacturing activity in the Chicago region. Treasury yields gained ground, and the U.S. dollar declined, while crude oil prices rose, and gold was slightly higher. Asian stocks finished out the year mixed in thin trading, and markets in Europe saw widespread losses, with the region posting the worst year since 2018.

The Dow Jones Industrial Average decreased 74 points (0.2%) to 33,147, the S&P 500 Index declined 10 points (0.3%) to 3,840, and the Nasdaq Composite went down 12 points (0.1%) to 10,466. In light volume, 2.9 billion shares of NYSE-listed stocks were traded, and 3.9 billion shares changed hands on the Nasdaq. WTI crude oil gained $1.86 to $80.26 per barrel. Elsewhere, the gold spot price increased $3.80 to $1,829.80 per ounce, and the Dollar Index decreased 0.3% to 103.50. Markets ended slightly lower for the week, as the DJIA went down 0.2%, the S&P 500 dipped 0.1%, and the Nasdaq Composite lost 0.3%. The three indexes were noticeably lower for the year, ending its three-year winning streak, as the DJIA tumbled 8.8%, the S&P 500 dropped 19.4%, and the Nasdaq Composite plummeted 33.1%.

Southwest Airlines Company (LUV $34) continued to be in the headlines after executives at the troubled airline said that the systems failure it has endured will "certainly" affect Q4 results. The meltdown came in the wake of a powerful winter storm that resulted in airlines cancelling thousands of flights over the three-day holiday weekend. However, the problems for LUV worsened, as systemwide chaos stranded thousands of travelers during the holiday week, prompting scrutiny from the U.S. Department of Transportation and the Biden Administration. However, LUV said it expects to operate on a normal schedule beginning today, and that it will take several weeks to work through the significant number of reimbursement requests for affected passengers. Shares traded modestly higher.

Equity news remained in short supply in the final trading day of 2022, as the S&P 500 posted a decline of nearly 20% for the year. Although the index was down for the month of December, it was still solidly higher for the quarter, which is the first quarterly advance since Q4 2021. The markets continued 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.