NEW YORK — In a broad market downturn, stocks experienced significant declines on Friday, concluding a shorter trading week amid the holiday season. The downturn was exacerbated by noteworthy drops among major technology companies often referred to as the “Magnificent 7,” whose considerable market sizes can significantly sway overall market trends.
The S&P 500 index fell by 66.75 points, equating to a 1.1% drop, landing at 5,970.84. Despite approximately 90% of stocks on the index declining, it still managed to secure a modest weekly increase of 0.7%. The Dow Jones Industrial Average dropped 333.59 points or 0.8%, closing at 42,992.21, while the tech-centric Nasdaq composite recorded a decline of 298.33 points, or 1.5%, ending at 19,722.03.
Significant players in technology, such as Nvidia and Microsoft, faced losses of 2.1% and 1.7%, respectively. Both companies boast market values exceeding $3 trillion, thus wielding considerable influence on the performance of the S&P 500 and Nasdaq indices. Meanwhile, a variety of retail companies also experienced downturns; Amazon and Best Buy both slipped by 1.5%. Analysts are keeping a close watch on the retail sector for indicators regarding holiday season performance.
On the other hand, energy stocks fared somewhat better, sustaining a loss of less than 0.1% as crude oil prices saw an uptick. Adam Turnquist, the chief technical strategist at LPL Financial, noted uncertainty over the recent rally that had led to gains in the preceding weeks. The S&P 500 had risen nearly 3% over a three-day period before the market paused for the Christmas break. Even with the losses on Friday, the market appears to be on track for another strong annual finish, with the S&P 500 projected to rise about 25% for 2024. This potential growth would mark the second consecutive year of gains exceeding 20%, a milestone not seen since 1997-1998.
The recent market gains have been fueled in part by encouraging economic data, indicating sustained consumer spending and a robust labor market. While inflation has been on the high side, it has been gradually declining. A report released Friday revealed a 0.2% dip in sales and inventory forecasts for the wholesale trade sector for November, following a slight gain in the prior month. This disappointing report follows another on the labor market that showed unemployment benefits remaining stable last week.
Positive economic indicators and the easing of inflation concerns prompted a shift in the Federal Reserve’s interest rate strategy this year, contributing to rising expectations for interest rate cuts, which have in turn bolstered market performance. The central bank recently implemented its third cut in interest rates for 2024. Despite inflation edging closer to the Fed’s target rate of 2%, it continues to hover above that level, raising concerns that it could surge again and tempering forecasts for further rate cuts.
Looking ahead to 2025, inflation concerns compound uncertainties related to the labor market’s trajectory and potential shifts in economic policy under the incoming Trump administration. There are growing apprehensions regarding Trump’s inclination toward tariffs and other policies, which could result in increased inflation, heightened U.S. government debt, and challenges in global trade.
In company-specific news, Amedisys saw a 4.7% increase after the home healthcare and hospice services company moved to extend its acquisition deadline with UnitedHealth Group. This decision comes as the Justice Department previously filed to block the $3.3 billion deal, citing worries over access to home health and hospice services in the U.S. The extended deadline aligns with anticipated regulatory changes under Trump’s administration, which is expected to take a more lenient stance toward mergers and may be less focused on antitrust matters.
In international markets, Japan’s benchmark index witnessed a significant uptick due to a continuing weak yen against the dollar, while South Korean stocks dipped after the opposition party voted to impeach the country’s acting leader. European markets experienced gains as well.
Bond yields remained relatively stable, with the yield on the 10-year Treasury increasing marginally to 4.62%, up from 4.59% the previous day. The yield on the two-year Treasury held steady at 4.33%. As Wall Street looks ahead, there are more economic reports anticipated next week that will provide updates on pending home sales, home prices, construction spending, and manufacturing activity.
