Specifically, mega cap losses accelerated this week on lingering valuation concerns and presumably tax-loss selling activity by participants who bought into the seemingly invincible stocks last year.
Some of the mega cap names aren't so "mega" any more given the massive loss in market capitalization they have suffered this year. The Vanguard Mega Cap Growth ETF fell 0.3% this week and 34.0% this year.
The Santa Claus rally period, which encompasses the last five trading days of the year and the first two trading sessions of the new year, has gotten off to an uneven start. It is believed to be a good sign for how the new year will start when this period produces a cumulative gain over that stretch. 2022 was a definite exception to that belief. Recall that the 2021 Santa Claus rally produced a net gain of 1.4% for the S&P 500 and yet the S&P 500 declined 5.3% this January and 5.0% in the first quarter.
It looked like Santa Claus might come charging to town following Thursday's rally. The S&P 500 closed the session just a whisker below the 3,850 level, where it has remained since mid-December, but then backed off again in Friday's trade.
When this year's Santa Claus rally period began, the S&P 500 stood at 3,822.39. The S&P 500 closed Friday's session at 3839.50 after visiting the 3,800 level.
It was also a disappointing week in the Treasury market. The 2-yr note yield rose 10 basis points to 4.42% and the 10-yr note yield rose 13 basis points to 3.88%.
The bump in yields was another headwind for equities, particularly the growth stocks, which was the case all year. The Russell 3000 Growth Index fell 0.3% this week, and 29.6% for the year, versus the Russell 3000 Value Index which rose 0.1% this week and fell 10.1% for the year.
Separately, Southwest Air was an individual story stock of note after the airline canceled thousands of flights due to the winter storm. Tesla was another focal point, trading in roller-coaster fashion. The stock hit 108.76 at its low on Tuesday, leaving it down 69.0% for the year, but managed to rebound and hit a high of 124.48 in Friday's trade.
Only two of the 11 S&P 500 sectors closed with a gain this week in thin trading conditions. The financials sector rose 0.7% and the energy sector rose 0.6%, aided by a bump in oil prices above $80.00/bbl. Meanwhile, the materials and consumer staples sectors were the worst performers with losses of 1.2% and 0.9%, respectively.
The economic calendar was light on major releases this week. Featured reports included the November Pending Home Sale Index, which declined 4.0%, and continuing jobless claims for the week ending December 17, which hit their highest level since February (1.710 million). Next week will see a cascade of major releases that includes the December ISM Manufacturing Index, the December Employment Situation Report, and the December ISM Non-Manufacturing Index.
· Dow Jones Industrial Average: -0.2% for the week / -8.7% YTD
· S&P Midcap 400: -0.2% for the week / -14.5% YTD
· S&P 500: -0.1% for the week / -19.4% YTD
· Russell 2000: flat for the week / -21.6% YTD
· Nasdaq Composite: -0.3% for the week / -33.1% YTD