U.S. stocks stumbled on Monday, ending 2024 on a sour note after a year of significant gains. The declines affected all three major indexes as concerns over inflation, geopolitical risks, and corporate challenges overshadowed Wall Street's optimism.
Major Index Performance and Broad Market Decline
As of Monday morning, the S&P 500 was down 1.5%, with nearly every stock in the index losing ground. Despite this drop, the benchmark remains on track for a second consecutive year of over 20% gains, highlighting the overall strength of 2024.
The Dow Jones Industrial Average fell 624 points, or 1.5%, while the tech-heavy Nasdaq Composite saw a 1.7% decline. Big Tech companies such as Apple (-1.7%) and Microsoft (-1.6%) were major drags on the market. Their large market capitalizations amplify their impact on the broader indexes, making their declines particularly significant.
Boeing Faces Renewed Challenges Amid Tragedy
Boeing shares dropped 3.2% following a fatal crash involving one of its 737-800 aircraft in South Korea. The crash resulted in the tragic loss of 179 lives, leading South Korean authorities to inspect all 737-800 jets operated domestically.
This incident adds to Boeing's troubles, which include a machinists' strike, persistent safety concerns with its top-selling aircraft, and a stock price that has fallen more than 30% this year. The airline industry broadly felt the ripple effects of the crash:
United Airlines: Down 3.5%
Delta Air Lines: Down 2.3%
American Airlines: Down 0.8%
Treasury Yields and Energy Market Movement
Bond yields fell slightly as investors sought safety amid the stock market decline. The 10-year Treasury yield dropped to 4.55% from Friday’s 4.63%, while the two-year Treasury yield declined to 4.26% from 4.33%.
In commodities, crude oil prices rose 1.1%, providing some support to energy stocks, which experienced the smallest sector drop within the S&P 500 (-0.3%). Natural gas prices surged 9.7%, buoyed by increased demand expectations due to colder January weather forecasts. Natural gas producers, such as EQT Corp., gained significantly, with EQT's stock rising 4%.
2024: A Stellar Year for Wall Street
Despite recent losses, 2024 has been a remarkable year for U.S. markets. Fueled by a robust economy, resilient consumer spending, and strong corporate earnings, the S&P 500 has posted gains exceeding 20%. Wall Street analysts project earnings growth of over 9% for the year, with final numbers to be confirmed after Q4 earnings reports in early 2025.
Cooling inflation throughout the year brought the rate close to the Federal Reserve's 2% target, leading to three interest rate cuts in 2024. These reductions eased borrowing costs, driving economic growth and market optimism. However, November’s Consumer Price Index (CPI) showed inflation edging up to 2.7%, raising concerns about a potential rebound.
Inflation Concerns and Policy Uncertainty
Concerns over inflation reigniting have been exacerbated by tariff threats from incoming President Donald Trump, as companies may pass increased costs onto consumers. The Federal Reserve has indicated a more cautious stance heading into 2025, prioritizing stability over aggressive rate cuts.
Limited News and Holiday Closures Impact Markets
With a holiday-shortened week, corporate and economic news is sparse. Key data points to watch include:
Thursday: U.S. construction spending update for November.
Friday: December manufacturing activity report.
Markets will be closed on Wednesday for New Year’s Day, further reducing trading activity.
Retailers Announce New Year’s Closures
Costco, Aldi, and Sam’s Club are among the major retailers closing their doors on New Year’s Day. Costco’s decision follows its Christmas closure and the recent removal of its holiday section. A spokesperson for Sam’s Club stated, “We want our employees to enjoy the holiday with their loved ones.”
Regular operations for all retailers are set to resume on January 2, with Costco and Sam’s Club operating reduced hours on New Year’s Eve.
Conclusion: A Cautious Close to a Historic Year
As 2024 nears its end, Wall Street faces a mix of challenges and triumphs. The year’s gains have been driven by strong fundamentals, including robust corporate earnings and a recovering economy. However, concerns over inflation, geopolitical risks, and sector-specific setbacks, such as Boeing's struggles, underscore the complexities investors face heading into 2025.
While the final days of trading may reflect short-term volatility, the long-term outlook for U.S. markets remains optimistic, contingent on continued economic resilience and effective policy management.
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