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Wall Street Ends Strong Holiday Week with Broad Sell-Off

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Wall Street’s week ended on a sour note Friday, with major indexes experiencing a broad sell-off that overshadowed gains earlier in the shortened holiday week. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all posted losses as investors took profits and adjusted portfolios ahead of the new year.

The Dow Jones Industrial Average fell 333.59 points, or 0.77%, to close at 42,992.21, ending a five-session winning streak that had followed its longest losing run since 1974. The S&P 500 dropped 66.75 points, or 1.11%, finishing at 5,970.84, while the Nasdaq Composite lost 298.33 points, or 1.49%, to end at 19,722.03.

Michael Reynolds, Vice President of Investment Strategy at Glenmede, attributed the losses to profit-taking, stating, “We are more than two years into a strong bull market, so it’s not surprising to see some people rebalancing portfolios.” The decline also interrupted the anticipated “Santa Claus rally,” a seasonal trend where stocks typically rise in the final five sessions of December and the first two sessions of January.

The market was further pressured by rising U.S. Treasury yields, with the benchmark 10-year yield hovering near a seven-month high of 4.63%. Higher yields increase borrowing costs, posing challenges for growth stocks, particularly the “Magnificent Seven” tech giants that have driven much of 2024’s market rally.

Tesla led the group’s declines for a second consecutive day, dropping 5%, while Nvidia, Alphabet, Amazon, and Microsoft all shed over 1.5%. Glenmede’s Reynolds noted that rising rates prompted investors to reassess valuations on these high-growth stocks, potentially seeking better opportunities elsewhere.

All 11 major S&P sectors recorded losses, with the hardest-hit being 2024’s leading sectors—consumer discretionary, information technology, and communication services—which fell between 1.1% and 1.9%.

Despite Friday’s pullback, the major indexes posted weekly gains. The S&P 500 rose 0.7%, the Nasdaq gained 0.75%, and the Dow added 0.36% for the week.

Some stocks bucked the trend. Amedisys surged 4.7% after extending the deadline for its $3.3 billion merger with UnitedHealth, while Lamb Weston climbed 2.6% following activist investor Jana Partners’ push for board changes.

Trading volumes remained below the six-month average due to the holiday-shortened week and are expected to stay subdued until January 6. Investors now shift their focus to the December employment report, scheduled for release on January 10.

 

S&P 500 Rises 1% on Christmas Eve, Tech Stocks Drive Gains: Live Updates

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The U.S. stock market saw a strong performance on Christmas Eve, with the S&P 500 gaining 1.1% to close at 6,040.04. The Dow Jones Industrial Average also rose by 0.91%, adding 390.08 points to reach 43,297.03, while the Nasdaq Composite climbed 1.35% to finish at 20,031.13. A significant contributor to the Nasdaq’s rise was a 7.4% increase in Tesla’s stock price, alongside gains in Amazon and Meta Platforms, which each rose over 1%.

The New York Stock Exchange closed early at 1 p.m. ET, and the bond market followed suit, closing at 2 p.m. The market will remain closed on Wednesday for Christmas Day.

Tuesday’s gains marked the beginning of the “Santa Claus rally,” a seasonal trend in which the market tends to see stronger performance during the last five trading days of the year and the first two days of January. Historical data from LPL Research shows that since 1950, the S&P 500 has averaged a 1.3% return during this period, far outpacing the typical seven-day return of 0.3%.

Despite the upbeat performance, experts advise caution. Paul Hickey, co-founder of Bespoke Investment Group, mentioned on CNBC’s “Squawk Box” that while the market shows positive momentum, it’s important to temper enthusiasm, as the market has already rallied significantly.

Over the past two days, the S&P 500 has gained 1.8% for the week, with the Dow up about 1%. The Nasdaq has surged 2.3% week-to-date, fueled by strong gains in megacap tech stocks. Additionally, the S&P 500 has turned positive for the month, rising by 0.1%. The tech-heavy Nasdaq has seen an impressive 4.2% increase in December, with major players like Google’s parent Alphabet up 16%, Apple up nearly 9%, and Tesla soaring by about 34%. However, the blue-chip Dow remains down by around 3.6% for the month, on track for its worst monthly performance since April.

On the corporate front, American Airlines experienced fluctuations in its stock price on Tuesday after the airline temporarily grounded all flights in the U.S. due to a technical issue during one of the busiest travel days of the year. Despite the disruption, the stock ended the session up 0.6%.

In other retail news, analysts at Jefferies expressed optimism about toy sales this holiday season. Their store checks indicated high traffic and lower inventory levels compared to earlier in the season. Board games, in particular, were reported as strong sellers both in-store and online. Jefferies also noted that discounts were lower than the peak Black Friday levels.

In the toy sector, Mattel and Hasbro stocks showed mixed results. While Mattel’s shares are down over 5% year-to-date, Hasbro has seen a more significant gain of 11%. However, Hasbro has faced recent declines, with its stock down nearly 13% month-to-date, while Mattel’s shares have fallen 6%.

 

Dow and S&P 500 Reach New Record Highs, Driven by Netflix Earnings and Tech Stocks Surge

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On Friday, both the Dow Jones Industrial Average and the S&P 500 closed at new record highs, bolstered by impressive earnings from Netflix and a rally in technology stocks. The Nasdaq also ended the day in positive territory, contributing to a sixth consecutive weekly gain for all three major Wall Street indices—their longest winning streaks since late 2023.

For the week, the S&P 500 advanced 0.9%, the Nasdaq Composite added 0.8%, and the Dow rose by 1%. A significant driver of Friday’s performance was Netflix, which surged 11.1% to a record closing high after exceeding Wall Street’s expectations for subscriber growth and projecting continued expansion through the end of the year.

Tech stocks, particularly the “Magnificent Seven,” continued to push the broader market upward. Apple saw a 1.2% increase, spurred by robust iPhone sales in China, while Nvidia climbed 0.8% following an optimistic price target increase from BofA Global Research. The rise in Netflix shares also helped lift the communication services sector, which gained 0.9%, the top performer among the 11 S&P 500 sectors. The information technology sector saw a 0.5% increase.

David Waddell, CEO of Waddell & Associates, summed up the market sentiment, describing it as a “what’s not to like” scenario, pointing to favorable economic data, lower inflation, and positive corporate earnings.

At the close of the session, the S&P 500 rose 23.20 points (0.40%) to 5,864.67, while the Nasdaq gained 115.94 points (0.63%) to end at 18,489.55. The Dow closed at 43,275.91, rising 36.86 points (0.09%). This marked the fifth record closing for the Dow in the past six sessions, though gains were tempered by a 3.1% decline in American Express, which missed quarterly revenue expectations.

Financial companies have largely enjoyed a successful earnings season, though the S&P Banks index slipped 0.1%, breaking a five-day winning streak. Despite this, positive earnings reports and solid economic data have continued to sustain the upward momentum in the market.

However, analysts have cautioned that stretched valuations could leave stocks vulnerable to a pullback, particularly with the S&P 500 trading at nearly 22 times forward earnings. The looming Nov. 5 U.S. presidential election could also introduce volatility. Despite these concerns, David Waddell expressed confidence that strong earnings could override any political uncertainty or valuation concerns.

“We’ve reached the limit of gains from multiple expansion, so the future trajectory depends on earnings. We are priced for very strong earnings, and any disappointment could cause market disruptions. However, barring a recession, the bull market remains intact,” Waddell stated.

Investors have also shown increased interest in small-cap stocks, with both the Russell 2000 and S&P Small Cap 600 outperforming the larger indices for the week, though both were slightly down on Friday.

The energy sector was the only S&P sector to decline on Friday, dropping 0.4%. Lower oil prices and a 4.7% drop in SLB, which missed earnings expectations, dragged down other oilfield service providers like Baker Hughes (-1.3%) and Halliburton (-2.1%). The energy sector ended the week as the worst performer, losing 2.6%, weighed down by a 7% decline in U.S. crude prices due to concerns over Chinese demand and the conflict in the Middle East.

In the healthcare sector, CVS Health dropped 5.2% after announcing the replacement of CEO Karen Lynch with veteran David Joyner and withdrawing its 2024 profit forecast. This news also impacted other health insurers, with Cigna and Elevance Health both seeing declines, the latter closing at its lowest level in nearly 15 months.

Trading volume on U.S. exchanges totaled 10.62 billion shares, below the 20-day average of 11.56 billion shares.