Wall Street set to close tough year in the red territory

Wall Street was dragged lower by losses in growth and healthcare equities during the final trading day of a tough year, which was marked by aggressive stance and recurrent interest-rate hikes to keep inflation under control in addition to the ongoing Russia-Ukraine war and recession woes.

The losses made communication services, technology and the retail index among the top decliners on the S&P 500, with the three sectors shedding between 0.9% and 1.2%.

Healthcare shares fell 1% and were also a major drag on the S&P 500 and the Dow, while the energy sector was the only gainer, with a marginal 0.1% rise.

The tech sector has been pummeled this year with declines of 29%, while energy (.SPNY) has recorded stellar annual gains of 58% due to a surge in oil prices.

The Dow Jones Industrial Average was down 237.34 points, or 0.71%, at 32,983.46, the S&P 500 was down 30.84 points, or 0.80%, at 3,818.44, and the Nasdaq Composite was down 93.36 points, or 0.89%, at 10,384.73.

Growth stocks have been under pressure from rising yields for much of 2022 and have underperformed their economically-linked value peers in a reversal of a trend that has lasted for much of the past decade.

S&P 500 has shed 20% this year and the tech-heavy Nasdaq is down 34%, putting them on track for their biggest yearly declines since the 2008 financial crisis, largely driven by a rout in technology shares.

The three main indexes are set for their first annual decline after three straight years of in the green amid tighter monetary policy following the fastest pace of rate hikes by the Federal Reserve since the 1980s.

Most rate-sensitive technology and growth stocks such as Apple Inc (AAPL.O), Amazon.com Inc, Alphabet Inc and Meta Platforms Inc fell between 0.7% and 1.4% on Friday, as U.S. Treasury yields rose.

The S&P 500 growth index (.IGX) is down about 30.5% this year, while the value index (.IVX) has fallen just 7.7%, with investors preferring high dividend-yielding sectors with steady earnings such as energy.

Focus has now shifted to the corporate earnings outlook in 2023 as investors grow increasingly concerned about the likelihood of a sharp economic downturn due to the rate hikes.

Wall Street’s main indexes closed higher on Thursday after unemployment data signaled the Fed’s policy tightening was starting to take a toll on the U.S. labor market.

Still, signs of resilience in the American economy have fueled concerns that the rates could stay higher for longer, though easing inflationary pressures have raised hopes of dialed-down rate hikes.

Money market participants see 65% odds of a 25-basis-point hike in the Fed’s February meeting, with rates expected to peak at 4.97% by the middle of next year.