U.S. stocks drift lower as investors return from Christmas

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By William Watts and Barbara Kollmeyer

U.S. stocks drifted lower Tuesday as investors returned from the three-day Christmas weekend, with bulls holding out for a seasonal “Santa Claus rally” after a premarket lift was attributed to China’s decision to lift Covid quarantine requirements for inbound travelers, raising hopes the world’s second largest economy may recover in 2023.

How are stocks trading?

Last week, the Dow gained nearly 1%, while the S&P 500 and Nasdaq fell for a third straight week.

See more: What to expect for the stock market in 2023 after the biggest decline since the financial crisis

What’s driving markets?

Friday marked the start of the so-called Santa Claus rally period — the final five trading days of the calendar year and the first two trading days of the new year. That stretch has, on average, produced gains for stocks, but failure to do so is often read as a negative indicator.

Read more: How a Santa Claus rally, or lack thereof, sets the stage for the stock market in first quarter

Investors drew some premarket optimism from news that China will drop quarantine requirements for incoming travelers starting in January. Those travelers will still need to present a negative COVID test within 48 hours of travel, but will no longer need to routinely isolate five days in a hotel, followed by five days at home.

“This is certainly something that traders and investors have been hoping for a long period of time as China remained very strict with its zero-covid policy throughout this year,” said Naeem Aslam, chief market analyst at AvaTrade, in a note to clients.

“Nonetheless, recession remains a major fear among investors and traders, and this is likely to keep a cap on any corrective moves in the markets. It is widely anticipated that trading volume is expected to remain on the low side due to a short holiday week,” he said.

Companies in focus

See: Airlines faced a difficult Christmas of storms and sickness, says Cowen: Who fared best and worst?

-William Watts

 

(END) Dow Jones Newswires

12-27-22 1003ET

Copyright (c) 2022 Dow Jones & Company, Inc.

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