Market Caution Prevails Ahead of Year-End
As the holiday-shortened week comes to a close, Wall Street’s main indexes are experiencing a decline, driven by a pullback in tech and growth stocks. This downturn follows an otherwise upbeat week, fueled by expectations of a strong period for markets.
Treasury Yields on the Rise
Yields on some U.S. Treasury notes have increased, with the benchmark 10-year note hovering near a seven-month high reached on Thursday, currently standing at 4.591%. This surge has led to a decline in rate-sensitive growth stocks, with Nvidia down 2.3% and Tesla off by 2.8%. Microsoft has also shed 1.1%.
Sector Performance
Among the 11 major S&P sectors, information technology and consumer discretionary have fallen the most, down about 1.3% each. This decline comes after these sectors powered most of the broader market’s gains in 2024.
Investor Sentiment
According to Clayton Allison, portfolio manager at Prime Capital Financial, “It feels like U.S. equity markets and investors are tepid heading into the end of the year. Nobody wants to be making any major moves before 2025 when the new administration comes in.” This cautious sentiment is reflected in the market’s performance, with the Dow Jones Industrial Average falling 98.04 points, or 0.23%, to 43,228.17, the S&P 500 losing 42.91 points, or 0.71%, to 5,994.68, and the Nasdaq Composite dropping 259.17 points, or 1.29%, to 19,761.26.
Weekly Gains Still Intact
Despite today’s decline, all three indexes are still set for weekly gains, with the benchmark index ending Thursday about 1% below its all-time high of 6,099.97 points clinched on Dec. 6.
The Santa Claus Rally
With three sessions left to close out the year, markets are entering the stock-buying season known as the “Santa Claus rally,” which typically sees the S&P 500 climb 1.3% on average in the seven-day trading period. However, according to Allison, “If yesterday is any indication, we are kind of starting off not great on a Santa rally. I feel like we got a lot of it post-election… today is going to give us a pretty good indication but it feels like more market participants are pretty cautious.”
Market Outlook
U.S. equities have broadly extended their gains from a stellar November, driven by hopes of pro-business policies under the incoming administration. Trading volumes in this holiday-shortened week have been below the average of the last six months and are likely to remain subdued until Jan. 6. The next major focus for markets will be the December employment report due on Jan. 10.
Individual Movers
Among individual movers, Amedisys gained 4% after the home health service provider and insurer UnitedHealth extended the deadline to close their $3.3 billion merger. Declining issues outnumbered advancers by a 3.63-to-1 ratio on the NYSE and by a 1.96-to-1 ratio on the Nasdaq. The S&P 500 posted no new 52-week highs and 2 new lows while the Nasdaq Composite recorded 32 new highs and 9 new lows.
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