The U.S. stock market faced significant declines on Monday as the tech sector experienced a sharp sell-off, contributing to broad losses across major indexes. The Nasdaq 100 dropped nearly 5% from its recent peak, while the S&P 500 and Dow Jones Industrial Average also posted notable declines. Rising interest rates have further dampened market sentiment, pressuring stock prices as investors reassess valuations in light of economic uncertainty.
Tech Sector Leads Market Declines
The tech-heavy Nasdaq 100 extended its mid-December losses, declining nearly 5% from its peak. Prominent mega-cap tech stocks, including Nvidia, Amazon, Meta, and Alphabet, all traded lower, building on Friday's sector-wide losses. The S&P 500 followed suit, shedding approximately 3% during the same period, as investor appetite for risk waned.
Rising bond yields have been a primary factor behind the tech sector's underperformance. While the 10-year Treasury yield edged lower on Monday, dropping six basis points to 4.559%, it remains significantly higher than earlier this month when it hovered around 4.1%. Higher yields typically reduce the appeal of growth-oriented tech stocks due to increased discount rates applied to future earnings.
Technical Indicators Flash 'Sell' Signal
Katie Stockton, founder of Fairlead Strategies, highlighted technical weaknesses in the stock market. "The SPX posted a modest gain during the shortened week, but our intermediate-term indicators logged 'sell' signals nonetheless, including the weekly stochastic and MACD," Stockton explained, referring to two momentum-based technical indicators.
These "sell" signals have raised the likelihood of a stock market correction in January, adding to investors' caution as the year-end approaches. Stockton's analysis suggests that further downside pressure could emerge, particularly if economic or geopolitical uncertainties escalate.
Boeing Stock Under Pressure After Plane Crash
Boeing shares faced significant pressure on Monday, dropping over 4% after one of its 737-800 planes crashed in South Korea over the weekend. The tragic incident claimed the lives of 179 people and reignited concerns about aviation safety and the company's liability.
This decline weighed heavily on the Dow Jones Industrial Average, which dropped 505 points, or 1.18%, to close at 42,486.82. Boeing's performance underscores the challenges faced by the aviation sector, which continues to navigate safety issues and fluctuating demand in a post-pandemic world.
Key Economic Data to Watch This Week
Investors are closely monitoring a series of economic data releases this week for insights into the health of the U.S. economy:
S&P Case-Shiller Home Price Index: Scheduled for release on Tuesday morning, this index will provide an update on trends in the U.S. housing market, which has faced headwinds from elevated mortgage rates and low inventory.
Initial Jobless Claims: Due on Thursday, this data will shed light on the labor market's resilience as the Federal Reserve evaluates its monetary policy stance.
ISM Manufacturing Data: Set for Friday, this report will offer a glimpse into the state of the manufacturing sector, which has shown mixed signals amid supply chain challenges and fluctuating demand.
Market Snapshot: Major Indexes at a Glance
Here’s where the U.S. indexes stood shortly after Monday's opening bell:
S&P 500: 5,891.32, down 1.32%
Dow Jones Industrial Average: 42,486.82, down 1.18% (-505.39 points)
Nasdaq Composite: 19,416.38, down 1.55%
Commodities, Bonds, and Cryptocurrency Overview
Crude Oil: West Texas Intermediate (WTI) crude rose 0.95% to $71.27 per barrel, while Brent crude, the international benchmark, gained 0.66% to $74.28 per barrel.
Gold: Prices edged lower by 0.20% to $2,626.60 per ounce, reflecting subdued demand for the safe-haven asset.
10-Year Treasury Yield: Dropped six basis points to 4.559%, providing slight relief to bond markets but remaining elevated.
Bitcoin: Declined 0.81% to $92,810, continuing its recent volatility as the cryptocurrency market adjusts to macroeconomic conditions.
Outlook for the New Year
As 2024 draws to a close, investors remain cautious amid rising interest rates, geopolitical tensions, and sector-specific challenges. The tech sector's sell-off, coupled with potential corrections signaled by technical indicators, suggests that volatility may persist into the new year.
Looking ahead, market participants will focus on Federal Reserve policy decisions, corporate earnings, and global economic trends to navigate the evolving landscape.
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