Stocks rocked by worse year since 2008, Amazon loses half its value, Feds warn recession is looming

Stock futures moved lower in premarket trading Friday as investors braced for the final trading day of the worst year for stocks since 2008. Futures tied to the Dow Jones Industrial Average slipped 153 points, or 0.5%. S&P 500 and Nasdaq 100 futures traded lower by 0.7% and 1.1%, respectively.

According to CNBC, The overnight moves followed a rally Thursday, with the Nasdaq Composite and S&P 500 climbing about 2.6% and roughly 1.8%, respectively. The Dow jumped 345 points, or 1.05%. For the week, the Dow and S&P are slightly higher, with the Nasdaq on track for a modest loss. All major averages are lower for December and are poised to snap a two-month win streak.

Friday marks the final day of trading of what’s been a painful year for stocks. A volatile bear market, sticky inflation, and aggressive rate hikes from the Federal Reserve battered growth and technology stocks. These factors also weighed on investor sentiment.
All three of the major averages are marching toward their worst year since 2008, slated to snap a three-year win streak. The Dow fared the best of the indexes in 2022, down 8.58%, while the S&P and tech-heavy Nasdaq tumbled 19.24% and 33.03%, respectively.

As the calendar year turns the corner, some investors think the pain is far from over, and expect the bear market to persist until a recession hits or the Fed pivots. Some also project stocks will hit new lows.

“We’re sort of stuck in neutral right now, because there are more unanswered questions than there are known entities. … We’ve got a lot riding on this coming earnings season, when we think about the pressures that are going to exist on margins,” Rebecca Felton, senior market strategist at Riverfront Investment Group, said on “Squawk Box.”

Meanwhile, It was a brutal year for mega-cap tech stocks across the board. But 2022 was especially rough for Amazon. Shares of the e-retailer are wrapping up their worst year since the dot-com crash. The stock has tumbled 51% in 2022, marking the biggest decline since 2000, when it plunged 80%. Only Tesla , down 68%, and Meta , off 66%, have had a worse year among the most valuable tech companies.

Amazon’s market cap has shrunk to about $834 billion from $1.7 trillion to start the year. The company fell out of the trillion-dollar club last month according to a new report from CNBC.

Much of Amazon’s misfortunes are tied to the economy and macro environment. Soaring inflation and rising interest rates have pushed investors away from growth and into companies with high-profit margins, consistent cash flow and high dividend yields.

But Amazon investors have had other reasons to exit the stock. The company is contending with slowing sales, as predictions of a sustained post-Covid e-commerce boom didn’t pan out. At the height of the pandemic, consumers came to depend on online retailers like Amazon for goods ranging from toilet paper and face masks to patio furniture. That drove Amazon’s stock to record highs as sales soared.

As the economy reopened, consumers gradually returned to shopping in stores and spending on things like travel and restaurants, which caused Amazon’s impressive revenue growth to fade. The situation only worsened at the start of this year, as the company confronted higher costs tied to inflation, the war in Ukraine and supply chain constraints.

Just over half of the 50 U.S. states are exhibiting signs of slowing economic activity, breaching a key threshold that often signals a recession is in the offing, new research from the St. Louis Federal Reserve Bank report said.

That report, released Wednesday, followed another report from the San Francisco Fed from earlier in the week that also delved into the rising prospect that the U.S. economy may fall into recession at some point in coming months.

The St. Louis Fed said in its report that if 26 states have falling activity within their borders, that offers “reasonable confidence” that the nation as a whole will fall into a recession.

Right now, the bank said that as measured by Philadelphia Fed data tracking the performance of individual states, 27 had declining activity in October. That’s enough to point to a looming downturn while standing short of the numbers that have been seen ahead of some other recessions. The authors noted that 35 states suffered declines ahead of the short and sharp recession seen in the spring of 2020, for example.

Meanwhile, a San Francisco Fed report, released Tuesday, observed that changes in the unemployment rate can also signal a downturn is on the way, in a signal that offers more near-term predictive value than the closely-watched bond market yield curve.

The paper’s authors said that the unemployment rate bottoms out and begins to move higher ahead of recession in a highly reliable pattern. When this shift occurs the unemployment rate is signaling the onset of recession in about eight months, the paper said.

The paper acknowledged its findings are akin to those of the Sahm Rule, named for former Fed economist Claudia Sahm, who pioneered work linking a rise in the jobless rate to economic downturns. The San Francisco Fed research, written by bank economist Thomas Mertens, said its innovation is to make the jobless rate change a forward-looking indicator.

The Tribulation is commencing…

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