U.S. stocks twisted and turned Tuesday morning as Wall Street returned from the long holiday weekend to barrel through the final four trading days of 2022.
The S&P 500 (^GSPC) fell 0.2%, while the Dow Jones Industrial Average (^DJI) advanced around 90 points, or 0.3%. The technology-heavy Nasdaq Composite (^IXIC) slid 0.8%.
A move by China to scrap quarantine requirements for inbound travelers beginning Jan. 8 had given sentiment a boost, with the country broadening its reopening after three years of zero-COVID controls and travel restrictions. The National Health Commission also said Monday that the nation’s management of the virus will be downgraded to Category B from the top-level Category A.
Tesla (TSLA) continued a sharp downtrend after Reuters reported the electric vehicle giant will run a reduced production schedule at its Shanghai factory in in January, extending the reduced output it began this month into the new year. Tesla stock fell more than 6% early into the session.
Shares of Southwest Airlines (LUV) tumbled 6% after the airline canceled roughly 2,900 flights — or 70% of scheduled flights on Monday, one day after scrapping 48% on Sunday.
The U.S. Transportation Department (USDOT) said called the magnitude of cancelled flights “unacceptable” and said it would investigate whether the company was responsible.
In other pockets of the market, the U.S. dollar index retreated as China’s easing of virus protocols spurred a move out of safe-haven assets. U.S. Treasury yields teetered higher after their biggest rise last week since April.
Oil prices extended a recent ascent to touch three-week highs as prospects for reopening demand from China added to concerns about the impact of colder weather in the United States on production. West Texas Intermediate (WTI) crude futures — the U.S. benchmark — rose 1% to top $80 per barrel.
The moves in early trading come after an up day Friday that helped the S&P 500 and Dow avert a third-straight weekly loss. The indexes advanced 0.6% and 0.5%, respectively. The Nasdaq also closed Friday higher but was down 1.5% for the week.
Investors have been hopeful a Santa Claus Rally can offer some reprieve to equity markets as they head toward their worst year since 2008. The phenomenon – a seasonal rise in the stock market that occurs at the end of December – is typically defined as the last five trading days of the year and first two of the new year. Yale Hirsch, creator of the Stock Trader’s Almanac, discovered the pattern in 1972.
A brutal December marked by rate and recession fears has kept selling pressures high all month and dampened hopes for the typical year-end rally. But with Friday’s positive close marking the first day of the period, the stock market will look to eke out gains during the shortened trading week.
DataTrek’s Jessica Rabe points out that the S&P 500 has a meaningfully better win rate and overall average performance following a negative calendar year of less than 10% than ones that post a higher loss — and 2022 is poised to end in the latter category.
“That said, when the index is down in the double digits as it is today, the odds of it being positive next year is essentially a coin flip and the returns aren’t nearly as promising as they would be if the S&P ended down less than 10%,” Rabe said in a recent note. “If there had been a real ‘Santa Claus Rally’ this month, the S&P might have ended the year with less than a double-digit decline.”
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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