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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%.

 

Japan Stocks Gain Amid Record Budget Proposal; Asia-Pacific Markets Mixed

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Japan’s Nikkei 225 rose 1.12% to close at 8,220.9 on Thursday, while the Topix index added 1.20%, ending at 2,766.78. The gains followed reports that the Japanese government plans to propose a record ¥107 trillion ($735 billion) budget for the fiscal year starting in April, reflecting increased allocations for social security and debt-servicing expenses, according to a draft reviewed by Reuters.

The Bank of Japan’s Governor Kazuo Ueda also expressed optimism on Wednesday, stating that Japan’s economy is likely to achieve sustainable and stable 2% inflation accompanied by wage growth by 2025. The 10-year Japanese government bond yield edged up 1.3 basis points to 1.078%, while the yen strengthened to 157.16 against the dollar, indicating market anticipation of potential interest rate hikes.

Among Japanese stocks, automakers Nissan and Honda surged 6.58% and 3.84%, respectively, as both companies initiated formal merger talks earlier this week. If successful, the merger would create the world’s third-largest carmaker by sales. Conversely, Japan Airlines slipped 0.24% after a cyberattack caused delays to domestic and international flights, although its systems have since returned to normal.

Elsewhere in the Asia-Pacific region, South Korea’s Kospi dipped 0.44% to 2,429.67, and the Kosdaq fell 0.66% to 675.64. Political tensions intensified as the opposition Democratic Party submitted a bill to impeach acting President Han Duck-soo, with voting expected on Friday. E-Mart shares gained 5.45% following reports that Alibaba Group Holding is nearing a deal to integrate its South Korean business with E-Mart’s e-commerce platform.

China’s CSI 300 posted slight gains, closing at 3,987.48, after the World Bank raised its GDP growth forecast for the country to 4.9% for 2024 and 4.5% for 2025, citing recent policy adjustments. The Chinese government also reaffirmed its commitment to stabilizing the real estate market, announcing measures to control the supply of commercial housing.

Singapore’s manufacturing output grew 8.5% year-on-year in November, driven by robust performance in the electronics sector. However, the figure fell short of Reuters’ 10% growth forecast, and on a month-on-month basis, output contracted by 0.4%, missing expectations for a 0.8% increase.

Markets in Australia, New Zealand, and Hong Kong were closed for the Boxing Day holiday, while U.S. markets were also closed overnight for Christmas. On Christmas Eve, U.S. stocks rallied, with the S&P 500 climbing 1.1% to 6,040.04, the Dow Jones Industrial Average adding 0.91%, and the Nasdaq Composite advancing 1.35%, supported by Tesla’s 7.4% surge.

The rally marked the beginning of the “Santa Claus rally,” a period typically associated with gains during the final trading days of December and the first two in January.