Daily Market Report January 2nd, 2024
The market ended the final day of 2024 in somewhat of a pattern that it has been trending lately, namely the major indices lower for the fourth straight day, but this time investors had a little pity on some of the worst Dow performers and gave them a break while breadth numbers were actually positive for a change. But the high-flying technology stocks continued to weaken once again.
For instance, the Dow ended nominally lower with a 29 point decline to 42,544 buts investors had pity on such losers as AMGN, JNJ, MRK and NKE by bidding them slightly higher to end their poor 2024 performances slightly better, and how long is this going to last? The index lagged the S&P and Nasdaq with an advance of “only” 13% for 2024.
The S&P ended lower again, but if the market can hold onto today’s opening indications, which are very strong and can go the distance and follow through on the last trading day of the Santa Claus period, then perhaps this process can work again, so if one is optimistic here, then perhaps 2025 can get off to a good start. It will depend on whether technology former leaders can get it together now. This decline of 25 points to 5881 continues the process began on December 18th when the Fed Chairman said that he sees only two interest rate cuts in 2005 and the Nasdaq collapsed by 3% on that day. So we had the market delivering another downbeat finish on the final day of another upside milestone-shattering year.
The S&P once again gave up an early gain to finish down as it set 57 record highs in 2024, and racked up a 23.3% gain for the year. This was its second straight year with a gain of more than 20%. The last time the index had as big a back-to-back annual gain was 1998 and finished with consecutive excess advance of more than 20% was that year and the following one in 1999 before things got dicey the year after that.
The Nasdaq got slammed again by 176 points to 19,310 but big techs did the trick until November and earlier this month to a yearly gain of 28.6%. Investors had some pity on the Russell 2000 Index of small stocks with a minor gain of 2 to 2230 but ended the month off 8% which was its worst showing since September 2022.
U.S. markets’ stellar run was driven by a growing economy, solid consumer spending and a strong jobs market as skyrocketing prices for companies in the artificial-intelligence business, such as NVDA and APP helped lift the market to new heights.
Solid corporate earnings growth also helped. Investors expect companies in the S&P to report broad earnings growth of more than 9% for the year, according to FactSet. The final figures will be calculated following fourth-quarter reports that start in a few weeks.
Another boost for the market was that the economy avoided a recession after the Federal Reserve hiked its main interest rate to a two-decade high in hopes of slowing the economy to beat high inflation. And the inverted yield curve, where the 2-year yield remained higher than the 10-year had also given that impression, which has so far not happened.
Lower inflation, which has gotten closer to the Fed’s 2% target, helped energize things, raising hopes that the central bank would deliver multiple interest rate cuts into next year, which would ease borrowing costs and fuel more economic growth.
Still, after three cuts in 2024, the Fed has signaled a more cautious approach heading into 2025 with inflation remaining sticky as the country prepares for a new President. His threats to raise tariffs on imported goods has raised anxiety that inflation could be re-ignited as companies pass along the higher costs from tariffs.
This year’s market rally went beyond stocks. As Bitcoin, below $17,000 just two years ago, climbed above $100,000 for the first time. And gold also shattered records on its way to a 27.4% gain for the year.
As mentioned above, the market’s mini post-Christmas slump doesn’t bode well for a ‘Santa Claus’ rally, the term for when U.S. stock indexes get a boost in the last five trading days of a year, plus the first two in the new year. Such a rally correlates closely with positive returns in January and the upcoming year. Even so, missing out on the Santa Rally isn’t necessarily a negative omen but it could pose problems in the new year, although there have been some advances despite the potential negativity on this as was spelled out in Tuesday’s Daily Market Notes.
Bond yields were mixed. The yield on the 10-year Treasury rose to 4.57% from 4.54% late Monday. The yield on the two-year Treasury held steady at 4.24% as the formerly negative yield curve is going back to a more traditional pattern, which is supposedly a better sign for the markets.
Meanwhile, the New York Stock Exchange and Nasdaq will be closed next Thursday, January 9 in honor of former President Jimmy Carter, continuing the long-held tradition in mourning the nation’s leaders. The 39th U.S. president and global humanitarian died on Sunday at his home in Plains, Georgia. He was 100 years old.
Economic reports will have: today - November Construction Spending, weekly jobless claims eased back to 211,000; Friday – December ISM Purchasing Manager’s Index.
By Don Selkin