Wall Street falls as growth stocks drag on S&P 500, Nasdaq

NEW YORK, Dec 27 (Reuters) – Wall Street was largely lower at the start of a holiday-shortened week on Tuesday as investors weighed the likelihood of prolonged restrictive Fed policy against China’s easing of its strict zero-covid-19 rules.

Interest-rate-sensitive growth stocks (.IGX) weighed heaviest, dragging down the technology-laden Nasdaq the most. The S&P 500 joined the Nasdaq in negative territory, while the Dow, driven by value stocks (.IVX), was modestly green.

“On down days, value tends to do well relative to growth,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

“There’s not a lot of news out there, thin volume, the China issue is out there, the normalization of a post-COVID environment,” Ghriskey added.

Shares in Tesla Inc ( TSLA.O ) fell 8.3% after a Reuters review of an internal plan revealed the electric car maker plans to scale back production at its Shanghai plant.

With Tuesday’s move, Tesla shares have lost nearly 68% of their value this year.

Rising government interest rates are putting interest-sensitive growth stocks under pressure, a recurring theme in 2022. For the year, growth stocks have plunged over 30% compared to a fall in value of around 7.5% in the same period.

With just four trading days left in 2022, all three indexes are on track to post their biggest annual losses since 2008, the nadir of the global financial crisis.

“(This year) it was all about the Fed raising rates, maybe too late,” Ghriskey said. The aggressiveness to bring inflation down to the 2% level has shocked the market and investors.

Beijing eased its strict COVID-19 curbs, which have hit the $17 trillion economy, fueling hopes of a revival in global demand and a better supply chain.

On the economic front, the Commerce Department’s first view of the U.S. merchandise trade balance showed the deficit narrowed 15.6%, while S&P Case-Shiller showed home price growth in its 20-city composite cooled to 8.6% year-over-year. lowest reading since November 2020.

The Dow Jones Industrial Average (.DJI) rose 68.31 points, or 0.21%, to 33,272.24, the S&P 500 (.SPX) lost 13.95 points, or 0.36%, to 3,830.87 and Nasdaq Composite (.128 or 0.5 point). 1.22% to 10,369.81.

Of the 11 major sectors in the S&P 500, consumer discretionary (.SPLRCD) and communications services (.SPLRCL) suffered the biggest percentage losses.

Energy stocks ( .SPNY ) were the biggest gainers, rising 1.2% as crude oil prices rose on an expected increase in demand from China’s relaxed COVID restrictions.

U.S.-listed shares of Chinese firms including JD.Com Inc , Alibaba Group Holding Ltd and Pinduoduo Inc ( PDD.O ) rose between 2% and 4.2% after Beijing announced it was easing travel restrictions.

Southwest Airlines Co ( LUV.N ) fell 5.5% after severe weather forced the commercial low-cost carrier to lead its peers in cancellations. The broader S&P 1500 Airlines Index (.SPCOMAIR) fell 2.4%.

Falling issues outnumbered advancing ones on the NYSE by a ratio of 1.32 to 1; on the Nasdaq a 1.86 to 1 ratio favored decliners.

S&P 500 posted 7 new 52-week highs and 3 new lows; The Nasdaq Composite recorded 74 new highs and 377 new lows.

Reporting by Stephen Culp in New York Additional reporting by Amruta Khandekar and Ankika Biswas in Bengaluru Editing by Matthew Lewis

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