Wall Street wobbles amid data showing a cooling economy

U.S. stocks drifted between losses and gains. They were losing ground early this week as retail sales for December fell more than expected. They climbed on Friday in the wake of Alphabet (GOOG - up +6.98%), the latest company to announce thousands of job cuts after Microsoft, Meta, and Amazon. On the same day, Fed Governor Christopher Waller said he would favour a 25-basis point interest rate increase at the next meeting, confirming market expectations. 

The Dow Jones Industrial Average lost 927.12 points week-over-week, or -2.70%, to 33,375.49, the S&P 500 fell -0.56% to 3,972.61 while the Nasdaq Composite added 61.27 points, or +0.55%, to 11,140.43.

European indices ended the week in the red with the MSCI EMU down -0.51% and the FTSE 100 down -0.94%. The European Central Bank maintained its hawkish tone. Klaas Knot, who serves as the governor of the Dutch central bank, said that the board members “will not stop after a single 50-basis point hike” at the next meeting in February.

In Asia, equity markets bucked the trend. The Shanghai composite notched its fourth consecutive weekly gain (up +2.18%) amid China’s rapid reopening. Yet growth in the world’s second largest economy slowed sharply in the fourth quarter. Japan’s Nikkei gained 1.66% as the Bank of Japan defied market speculation in keeping its key rate and yield curve control policy unchanged. 

Growth stocks set the pace   

The job cuts at Alphabet-Google (6% of their global workforce slashed, or 12,000 jobs) sent the communication services index up +2.97%. Its performance was also boosted by Netflix. NFLX shares rallied again (up +2.91%) after the streaming giant posted an increase of 7.6 million in subscribers in the fourth quarter, ending the year 2022 with 230.75 million subscribers.

Among the week’s top performers, the I.T. sector gained +0.68%, pushed higher by Apple stocks (APPL), up +2.31%. Energy was also in the green (up +0.74%) as WTI crude oil prices rose +1.82% despite weak U.S. economic data and an industry report showing a surprise jump in U.S. crude stocks.

All the other S&P sectors finished the week in negative territory. The worst performance came from industrials (-3.36%). Industrial production fell -0.7% in December, significantly higher than the consensus estimate (decline of -0.1%). It’s the biggest drop in industrial activity since September 2021. Defensive sectors were also facing headwinds. Utilities and consumer staples lost -2.93% and -2.86% respectively.