Daily Market Report January 3rd, 2024
In another awful session, what began with large gains in the major indices which could have gotten the Santa Claus rally back to positive if gone the distance, the indices just fell apart very badly but were able to come back from really bad early afternoon losses to end only modestly lower.
For instance, the Dow began with a 361 point advance which then became a horrible 370 point decline at 2pm before rallying off of those lows to end lower by 152 to 42,392. The declines were led by AAPL which put in its worst day since early August, BA and no surprise here, CRM, SHW and MSFT. And what happened to those weaker issues which ended 2024 on the upside because of “bargain hunting”, such as AMGN, JNJ, MRK and NKE? They all fell again to start the new year.
The S&P also fell apart from a nice 55 point early advance to a decline of 52 by 2pm which is a really depressing downside turnaround, before it finally found some support and ended with a closing decline of 13 down to 5868, and it now lower for five straight sessions for its longest losing streak since April.
The Nasdaq followed the same pattern with a large early gain turning into a huge early afternoon decline before it showed some bargain hunting and ended lower by 30 to 1928, also for its fifth straight loss in a row.
And hip, hip, hooray for the Russell 2000 Index of small stocks, which finally stopped going down, rose by 1 point to 2231 while the VIX continued to rise with a gain up to 17.93.
TSLA was a negative influence after disclosing it delivered fewer vehicles in the last three months of 2024 than analysts expected. The electric-vehicle company’s stock slumped by 6%, and is now down by 22% from its high last month. This was one of the big winners of 2024, particularly after the new President’s Election Day victory raised speculation that Elon Musk’s close relationship with the president-elect could help the company. And so much for that with some analysts’ jumping on board with price targets in the 500-600 range which is so typical of people coming in at high prices, predicting even more unrealistic ones.
Consider a measure tracked by Bank of America of how heavily financial analysts are recommending stocks, which recently hit its highest level since early 2022. This measure has often been a reliable indicator in the past, and it is now only a bit shy of triggering a signal to sell for those who are leery when most people look in the same direction as for instance the almost instantaneous movement into prices in excess of S&P 7000 sometimes this year, which we can only hope will now happen.
FUL plunged by 7.5% after the seller of adhesives, sealants and other specialty chemical products said it has recently seen a slowdown in sales to a number of its customer categories. And how about NMRA which collapsed by 80% after the failure of its depression drug.
CEG jumped for the one of the biggest gains in the S&P after announcing it won more than $1 billion in combined contracts with the U.S. General Services Administration to supply power and perform energy savings and conservation measures.
And how about NVDA, where most people now are bearish on after its tremendous gains last year, rose by 3% after following up its nearly 240% surge in 2023 with a better than 170% jump last year.
Inflation has remained stubbornly above the Fed’s 2% target, and the new President’s pushing for tariffs and other policies has raised worries about potentially more upward pressure on prices that U.S. consumers have to pay. That drove the Fed to say recently it will likely deliver fewer of the economy-helping cuts to interest rates in 2025 than it had earlier thought.
Many investors expect the Fed to keep its main interest rate steady later this month, which would be the first meeting in four where it hasn’t eased rates.
In the bond market, Treasury yields held relatively steady. The yield on the 10-year Treasury edged down to 4.56% from 4.57% late Tuesday after the weekly jobs report showed a slight decline in weekly jobless claims, which is the latest signal that the job market remains solid.
If the early morning gains in the various stock index futures collapse again like yesterday, then things are really in bad shape, and let’s hope that we can go the positive distance today.
Economic reports will have: today - November Construction Spending remained unchanged, weekly jobless claims eased back to 211,000; today - December ISM Purchasing Manager’s Index.
By Don Selkin