Stock Market Inches Lower On Weak Housing Data; Disney, Amazon Slide
The stock market edged lower for the fourth day in a row as weak housing data amplified concerns that 2023 could bring a global recession. Dow Jones component Walt Disney (DIS) and Amazon (AMZN) fell Monday as the so-called Santa Claus rally was nowhere in sight.
The Nasdaq composite fell 1.3% while the S&P 500 dropped 0.5%. The Dow Jones Industrial Average lost 0.3%. The small-cap Russell 2000 index shed 0.6%.
Volume fell on the Nasdaq but rose on the NYSE vs. the same time on Friday.
On Friday, the S&P 500 followed the Nasdaq in falling below the 50-day moving average. The S&P is now at its lowest level since Nov. 9.
This week marks the leading edge of Santa rally seasonality for the stock market, peaking between Christmas and the first two trading days of 2023.
The yield on the benchmark 10-year Treasury note rose 13 basis points to 3.58%. Crude oil prices gained 1.9% to $75.67 per barrel.
The Innovator IBD 50 ETF (FFTY) dropped 1%, led lower by fast-food chain Wingstop (WING). It dropped nearly 5%, slicing below its 50-day line and just below its buy zone from a 148.94 buy point.
Housing Market Index Adds To Slowdown Worries
All 11 S&P sectors lost ground Monday.
Among them, the S&P Real Estate Select Sector ETF (XLRE) fell an additional 1.7% after Friday’s 3% drubbing.
The December housing market index came in at 31, lower than the 34 consensus and the lowest in 10 years. The measure tracks homebuilder assessments of present and future sales, and buyer traffic. The index is a weighted average of present sales of new homes, sales expected in the next six months, and traffic of prospective buyers.
The index has fallen short of expectations every month in 2022 as mortgage rates peaked over 7% in November, a level not seen since 1998. Rates have eased back toward 6%.
“The key monthly survey of homebuilders worsened again in December and was worse than expected,” said Bill Adams, chief economist for Comerica Bank. “High mortgage rates are a huge headwind for housing.”
Comerica forecasts a mild recession in the first half of 2023, predicting that housing prices will fall by mid- to high single digits from their early 2022 peaks to a trough in mid-2023.
Homebuilder stocks dropped on the bearish housing news, including KB Home (KBH), Lennar (LED), Builders FirstSource (BLDR) and Meritage Homes (MTH).
Disney, Amazon, Apple Fall
Disney fell 3.6% after disappointing ticket sales of its “Avatar: The Way of Water” movie release in some major markets. The entertainment giant is down over 44% year to date and in bear market territory. It is the Dow Jones biggest loser today.
Amazon slid 2.6% as threats of a recession appeared to dampen consumer appetites for holiday gift buying, either online or in stores.
Dow Jones tech leaders Apple (AAPL) and Microsoft (MSFT) were lower after today’s stock market open.
Tesla (TSLA) stock bounced 2% Monday after Chief Executive Elon Musk’s Twitter poll showed that most users wanted him to “step down as head of Twitter.”
Oppenheimer also downgraded Tesla to perform from outperform on Monday morning, citing potential brand destruction due to the Twitter controversy.
Stock Market Movers And Shakers
Vaccine maker Moderna (MRNA) fell 1.3% following a Jefferies upgrade to buy from neutral. The firm also raised its price target to 275. The analyst sees upside after positive Phase 2 data from its personalized cancer vaccine for skin cancer patients, and expects positive Phase 3 data from a respiratory vaccine.
MRNA stock is extended from the 5% buy zone of a cup-with-handle base with a buy point of 188.75.
Aerojet Rocketdyne (AJRD) climbed 1.6% in heavy volume, on news that defense contractor L3Harris (LHX) will buy the small cap for $4.7 billion. LHX shares dropped 4% in heavy volume.
Dow Jones member Caterpillar (CAT) continues to trade near a 239.95 buy point in a new flat base, according to IBD MarketSmith pattern recognition. Shares found support at the 21-day exponential moving average and the relative strength line is edging to new highs. CAT stock was up 0.9% Monday.
Earnings reports this week include General Mills (GIS), Heico (HEI), Micron Technology (MU) and Dow Jones stock Nike (NKE).
Follow Michael Molinski on Twitter @IMmolinski
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