U.S. stocks dropped on Monday as the final trading week of 2024 began with widespread losses across major indexes. Despite a strong year overall, the S&P 500 (^GSPC), Nasdaq Composite (^IXIC), and Dow Jones Industrial Average (^DJI) all fell about 0.7%, reflecting ongoing investor caution as year-end approaches.
Major Index Performance Amidst Year-End Volatility
Stocks struggled to find their footing as markets grappled with the impact of rising bond yields and recent declines in Big Tech. On Friday, the Nasdaq Composite fell 1.5%, while the S&P 500 lost over 1%, weighed down by losses in prominent tech names like Tesla (TSLA) and Nvidia (NVDA).
The highly anticipated "Santa Claus" rally, historically one of the most consistent positive stretches for the S&P 500, has disappointed this year. Since December 24, the index is down nearly 1%, a stark contrast to its average 1.3% gain during this period since 1950. Nonetheless, 2024 remains a banner year for equities, with the S&P 500 up over 25%, the Nasdaq up more than 30%, and the Dow posting a solid 14% gain.
Treasury Yields Retreat but Remain Elevated
The 10-year Treasury yield (^TNX) retreated slightly from its seven-month high on Monday, hovering near 4.55%. Elevated yields have been a recurring theme throughout the year, reflecting ongoing concerns about inflation and the Federal Reserve's monetary policy trajectory. While a modest pullback in yields provided some relief, the broader pressure on equities persisted.
Natural Gas Futures Surge Amid Cold Weather Expectations
U.S. natural gas futures for February delivery surged as much as 20% on Monday, marking the largest one-day move since the contract's inception in 2012. The sharp rise was driven by increased demand expectations due to forecasts of colder weather in January.
The rally in natural gas prices provided a boost to energy stocks, with the Energy Select Sector SPDR Fund (XLE) standing out as the only S&P 500 sector in the green, up about 0.15% on the day.
Resilience in Housing Market Activity
In a separate development, housing contract activity rose for the fourth consecutive month in November. The Pending Home Sales Index, which measures contract signings on existing homes, increased by 2.2% from October to reach its highest level since February 2023.
The index, which stands at 79 (with 100 representing 2001 activity levels), is up 6.9% compared to November 2023. Lawrence Yun, chief economist at the National Association of Realtors (NAR), attributed the improvement to recalibrated consumer expectations regarding mortgage rates and the availability of more inventory.
Markets Honor Former President Jimmy Carter
Former President Jimmy Carter passed away on Sunday at the age of 100 at his home in Plains, Georgia. In his honor, the New York Stock Exchange and Nasdaq announced they will close on Thursday, January 9, for a National Day of Mourning.
Broader Context: A Year of Records on Wall Street
Despite the current downturn, 2024 has been a year of remarkable achievements for Wall Street. The S&P 500 recorded 57 all-time highs, making it one of the top five years for most records set by the benchmark index.
This year's rally was fueled by robust corporate earnings and significant momentum from the "Magnificent Seven" tech stocks—Nvidia (NVDA), Tesla (TSLA), Alphabet (GOOGL, GOOG), Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), and Meta (META). These companies have been pivotal in driving the broader market higher, with strong performances across various sectors.
Market Snapshot
By midday on Monday, all three major indexes had recovered slightly from session lows:
S&P 500 (^GSPC): Down about 0.7%, having been down over 1.6% earlier.
Nasdaq Composite (^IXIC): Also down about 0.7%, buoyed by a recovery in Nvidia, which rose 1.5% after starting the day lower.
Dow Jones Industrial Average (^DJI): Down 0.7%, in line with broader market trends.
Outlook for the Final Days of 2024
With only two trading days remaining in the year, investors are focused on regaining momentum to solidify 2024's impressive gains. However, challenges remain, including elevated yields, sector-specific pressures, and weaker-than-expected seasonal trends.
The coming weeks will bring renewed scrutiny on Federal Reserve policy, corporate earnings, and macroeconomic data, setting the stage for 2025. For now, the market remains in flux, balancing short-term headwinds against a backdrop of long-term growth potential.
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