4:10pm: Year-end sell-off weighs on stocks
US stocks closed lower on Monday as investors engaged in year-end profit-taking, capping off an otherwise strong year for the market.
The major indices finished the day in negative territory, with the Dow Jones dropping 1% to 42,574, the S&P 500 falling 1.1% to 5,907, and the Nasdaq slipping 1.2% to 19,487.
The sell-off was driven by several factors, including profit-taking after a strong year of market performance, weakness in the technology sector, and a decline in Boeing's shares following a tragic accident involving one of its aircraft models, which contributed to the Dow's downturn.
12:35pm: Wall Street stumbles
The US stock market is facing a tough final trading week of 2024, with major indices sliding as investors close out the year. The Dow and the S&P 500 are down 0.7%, while the Nasdaq has fallen 0.8%.
Growth-focused companies like Tesla and Meta have seen sharp losses, and the semiconductor index is down over 2%.
Among notable stock movements, Boeing has fallen 3.5% due to safety concerns in South Korea, while MicroStrategy shares have plunged 7.7% following reports of share sales. Additionally, crypto-related stocks are under pressure as bitcoin prices slide.
11:10am: Stocks fall
The three major indexes continued their slide on Monday, with the Nasdaq down 1.2%, the Dow Jones down 1% and the S&P 500 down 1% late-morning.
“We can’t drive major conclusions in a holiday-shortened and thin-trading-volume week, but last week’s price action looked pretty close to the narrative of rotation from tech to non-tech stocks that many investors expect to be the theme of next year,” Swissquote Bank senior analyst Ipek Ozkardeskaya commented.
“The US stocks will end the year with the biggest gains since 1997 and the expectations have probably gotten too high for the AI related companies to satisfy. In numbers, the big tech stocks are expected to eke out a 30% earnings growth next year, but Bloomberg economists warn that the pricing of the S&P500 implies a growth figure closer to 40%.”
9.54am: Tech stocks lead sell-off
Wall Street tech stocks are falling sharply for the second session in row, with the Nasdaq Composite index plunging 326 points or 1.65% in the first few minutes of Monday trading.
This followed a near-300-point decline last Friday.
The S&P 500 has also dropped 1.5%, the Dow Jones has fallen 1.4% and the small and mid-caps of the Russell 2000 are down just over 1%.
Semiconductor stocks are among the big fallers, with Super Micro Computer Inc, Broadcom Inc and Micron Technology Inc three of the five biggest fallers on the S&P.
Boeing, down almost 5%, was initially bottom of the list, on the back of the South Korean airline crash yesterday.
Among the trillion-dollar mega-caps Apple, Nvidia, Microsoft, Alphabet, Amazon, Meta and Tesla are all in the red, down between, 1.1% and 1.7%.
8.55am US stock futures dive
Wall Street stock futures have dived sharply now, with the Nasdaq 100 expected to plunge another 1.1% at the open and the S&P seen heading for a 1% fall.
Looking around at US-related news headlines, there are reports that Russia has rejected Donald Trump's plan to end the Russia-Ukraine war.
The US President-elect’s team suggested that Ukraine's NATO membership be deferred in exchange for a ceasefire, but Russian state-owned media say this has been pooh-poohed by Moscow.
But, the same as it was at the end of last week, bonds markets are what is controlling stocks right now, says market analyst Kenny Polcari at SlateStone Wealth.
"Why the weakness? Where is Santa? Well, have you taken a look what bonds are doing?" he hollers, noting that the US 10yr bond yield is up another 20 basis points since Jerome Powell and the Federal Reserve cut rates earlier this month and they are up 100 bps since the September cut.
This morning the 10-yr yield is 4.59%.
"And so you ask, why are yields rising when [Powell] is cutting? Shouldn’t yields go in the same direction as Fed funds?
"Well, When the 10-year Treasury yield rises while the Fed is cutting rates, it can signal several complex dynamics at play in the bond market and the broader economy," says Polcari, pointing to several possible explanations, including markets maybe expecting higher inflation in the future if the Fed’s rate cuts are seen as too aggressive, potentially overstimulating the economy; or optimism about economic growth, lower risk aversion encouraging investors to move out of safe-haven assets like long-term Treasuries; an imbalance in supply and demand "Econ 101" where increased supply of 10-year Treasuries pushes yields higher regardless of Fed policy; or maybe doubts about the effectiveness of rate cuts; or finally perhaps the term premium (the extra yield demanded by investors for holding longer-term bonds) might increase due to perceived risks related to inflation, debt sustainability, or uncertainty about future Fed actions.
"In any event – the bond market is telling us to be cautious….so pay attention," Polcari says. "And do not discount the recent strength in the dollar….it is up 7% for the quarter and up 2.2% in the last month.
"Remember – a strong dollar can have significant impacts on stock prices and commodities, with the effects varying based on a company's operations, sector, and market focus."
Also, much of the moves in market over the next two days "will be technical", he adds, "some profit taking, some tax selling and some short covering – all very typical for this time of year.
"It’s another holiday shortened week, volumes will be light, moves will be exaggerated. Don’t make any major investing decisions this week."
7.30am: Nasdaq to lead further declines for Wall Street
Monday's US stock market session is set to see an extension of the decline started last week, on the penultimate day of 2024 for investors to tinker with their portfolios.
Futures for the S&P 500 were indicating are fall of over 0.4%, while Nasdaq 100 futures were down 0.5% Dow Jones futures were down 0.2%.
At the end of last week, the full Nasdaq Composite index tumbled 1.5% while the S&P slumped 1.1% and the Dow dropped 0.8%.
This all but dashed the possibility of finishing the year at record highs, said Kyle Rodda, market analyst at Capital.com, though the S&P 500 has still gained around 25% on a nominal basis for the year.
"Diluting the optimism is the fear that after two successive years of similar performance, valuations are too rich and positioning too stretched, despite a strong outlook for fundamentals going into 2025, with that sentiment driving part of Friday’s pullback."
Friday’s US retreat was caused by a jump in bond yields, said Rodda, "amidst persistent fears of a material re-rating in bonds to reflect strong growth, a significant fiscal impulse from the Trump administration and, tangentially, fewer Fed cuts next year".
Trading volumes were robust on Friday, which he notes defied the generally sleepy nature of trade this time of the year.
"It perhaps indicates a high level of churn in US equities, particularly tech stocks, which is an amber signal of a market cutting exposure and rebalancing going into the new year."
For today and the week ahead the macro and other economic events are thin on the ground, though end-of-year flows are "potentially" a driver of prices across financial markets, he says.
Today, investors and traders will have Chicago PMI data, pending home sales and the Dallas Fed manufacturing index to chew over.