The first trading session of 2024 witnessed a downturn in the S&P 500 and Nasdaq Composite, driven by a decline in Apple shares following a broker downgrade and increased Treasury yields. This report delves into the factors influencing the market performance, including the impact of U.S. interest rate expectations, tech sector struggles, and key company movements.
Key Points:
- Market Performance: The S&P 500 and Nasdaq Composite closed lower on the first trading day of 2024. The S&P 500 lost 0.57%, closing at 4,742.83 points, while the Nasdaq Composite declined by 1.63% to 14,765.94.
- Tech Sector Weighed Down: The technology sector (SPLRCT) led decliners with a 2.6% fall, marking the index’s largest one-day drop since August 2. Apple, the tech giant, experienced a significant decline of 3.6% after Barclays downgraded the company to “underweight” due to weakening iPhone demand.
- Treasury Yields Impact: Rising U.S. Treasury yields, reaching a two-week high above 4.000%, contributed to the lackluster market session. The movement reflected investors’ revised expectations for U.S. interest rate cuts in 2024, particularly impacting growth stocks and tech shares.
- Megacap Stocks: Other megacap stocks, including Nvidia, Meta Platforms, and Microsoft, also recorded declines ranging from 1.4% to 2.7%. The overall sentiment was affected by concerns about the potential hindrance to economic activity posed by tight monetary policy.
- Sector Performance: The S&P 500 sectors displayed mixed performance. Healthcare (SPXHC) emerged as the top performer, gaining 1.8% and reaching its highest close since mid-December 2022. Moderna’s 13.1% advance contributed to the healthcare sector’s positive momentum.
- Energy and Crypto Stocks: Despite a slip in crude oil prices, the energy index (SPNY) rose 1.2%. Crypto-related stocks, such as MicroStrategy, gained traction as bitcoin surpassed $45,000, fostering optimism about the approval of exchange-traded spot bitcoin funds.
- Individual Company Movements: Tesla, despite delivering a record number of electric vehicles in Q4, remained flat. Boeing experienced a 3.4% drop after being removed from Goldman Sachs’ “conviction list.” Citigroup advanced 3.1% following a positive outlook from Wells Fargo.
- Market Outlook: Investors are closely watching the upcoming release of the Fed’s December policy meeting minutes and labor market data. While a rate cut in January is unlikely, traders anticipate a 70% chance of a 25-basis point cut in March, reflecting ongoing uncertainties in the market.
The S&P 500 and Nasdaq Composite faced headwinds in the first trading session of 2024, influenced by a combination of tech sector struggles, rising Treasury yields, and concerns about the broader economic impact. The performance of key megacap stocks, sector dynamics, and movements in Treasury yields will continue to shape market sentiment as investors navigate uncertainties in the evolving economic landscape.
