Just five trading sessions accounted for more than 95% of the S&P 500 index losses in 2022 as the U.S. stock market heads for its worst year since 2008.
In a note to clients on Wednesday, Datatrek co-founder Nicholas Colas described these five worst trading sessions of 2022 as the “five days that killed the year.”
Two were caused by disappointing inflation data, while the others were triggered by disappointing corporate earnings and commentary from Federal Reserve Chairman Jerome Powell, Colas pointed out.
September 13 (-4.3%)
On the worst day for stocks since 2020, the release of the August U.S. consumer price index report sent traders into a panic when the data showed annual headline and core inflation running hotter than expected.
The headline number came in at 8.3% for the 12 months through August, while core inflation — which strips out volatile food and energy prices — accelerated at 6.3%.
Economists and analysts were particularly rattled by the monthly core inflation number, which came in at 0.6%, double the expected rate of 0.3%, stoking concerns about stubbornly high housing costs as energy prices began to decline after earlier being the biggest driver of this year’s inflation.
May 18th (-4.0%).
Retail giant Target Corp. TGT, +0.15% missed first quarter earnings expectations by a wide margin, elevating worries about the U.S. consumer’s ability to cope with inflation into a full-blown panic one day after Walmart Inc. WMT, -1.33% highlighted similar concerns.
Adding to the pressure on the market, during an event hosted by the Wall Street Journal Powell acknowledged that “there could be some pain involved” as the FOMC raised interest rates.
June 13 (-3.9%)
This day’s punishing selloff was also triggered by the release of CPI data, as the numbers for the month of May came in higher than expectations. The S&P 500 finished the session in bear-market territory for the first time in 2022, down 21.8% from the record highs reached in early January.
April 29 (-3.6%)
The market’s decline on this day was also triggered by a corporate earnings disappointment. However, this time, the focus was on e-commerce, and the ripple effects sent many of the megacap technology stocks reeling.
Amazon.com Inc. AMZN, -0.87% — which like both Target and Walmart is a member of the consumer discretionary sector of the S&P 500 — missed earnings expectations for the first quarter while reducing its guidance. The stock ended the day down 14%, its biggest single-session decline since 2006. Apple Inc. AAPL, -2.28%, Microsoft Corp. MSFT, -0.37% and Google owner Alphabet Inc. GOOGL, -1.22% were also down sharply.
May 5 (-3.6%)
Markets tumbled one day after Powell assured investors during a post-meeting press conference that the Fed wasn’t considering interest-rate hikes of greater than 50 basis points. Of course, this statement didn’t age well, as the central bank went on to hike interest rates by 75 basis points at the following four consecutive meetings.
According to Colas, investors can glean some helpful insights about the root causes of this year’s market misery from these five sessions.
To wit, investors had clearly realized by the spring that stubbornly high inflation would force the Fed to raise its benchmark interest rate more aggressively than it was letting on. Also, inflated expectations for corporate earnings helped contribute to the pain as U.S. consumer spending waned.
U.S. stocks sold off far more often than they traded higher this year, a deviation from the historic pattern since World War II whereby stocks typically climb far more often than they fall. Through Tuesday’s session, the index fell during 141 trading days (including Tuesday), while finishing higher during 107 up days.
The S&P 500 was on track to finish 2022 down more than 20% as of midday on Wednesday as all three of the main indexes were trading in the red, with the S&P 500 SPX, -0.74%, Nasdaq Composite COMP, -0.90% and Dow Jones Industrial Average DJIA, -0.68% adding to their losses with just two more trading days left in the year.