U.S. equities ended the day lower on Monday, as a strong year for the markets appeared to potentially conclude on an unsteady note. The S&P 500 index dropped by 1.1%, marking its third consecutive day of decline. Approximately 90% of the stocks in the index faced losses, yet the benchmark remained on course for a second consecutive yearly increase exceeding 20% on the verge of the New Year.
The Dow Jones Industrial Average experienced a decline of around 1%, while the Nasdaq composite index fell by 1.2%. The technology sector, particularly major players, significantly contributed to the overall market downturn. Apple and Microsoft both decreased by 1.3%, with their high valuations negatively influencing the broader market climate.
Other tech giants faced similar struggles; Meta Platforms saw a drop of 1.4%, Netflix declined by 0.8%, and Amazon was down by 1.1%. The technology and communication services sectors of the S&P 500 have performed exceptionally well, achieving impressive gains of 37.1% and 39.9%, respectively, over the year.
In the wake of a tragic incident involving one of its aircraft, Boeing’s stock plummeted by 2.3%. A plane skidded off the runway in South Korea, resulting in the loss of 179 lives among the 181 people on board. The South Korean government has initiated inspections of all 737-800 aircraft operated by local airlines. This calamity represents yet another setback for Boeing, which has already faced challenges such as a machinists’ strike, ongoing safety concerns regarding its best-selling planes, and a significant decline in stock value, with shares down more than 30% this year.
Airline stocks that operate Boeing aircraft experienced instability following the crash, with United Airlines dropping by 1.4% and Delta Air Lines dipping 0.9%. Overall, the S&P 500 fell by 63.90 points to close at 5,906.94, while the Dow decreased by 418.48 points to end at 42,573.73, and the Nasdaq lost 235.25 points, closing at 19,486.78.
In the bond market, yields fell as the yield on the 10-year Treasury dropped to 4.53% from 4.63% at the end of the previous week, and the two-year Treasury yield decreased to 4.25% from 4.33%. Meanwhile, the price of U.S. crude oil increased by 0.6%, and energy stocks fared better than the overall market, with a slight decline of just 0.1%. Natural gas prices surged by 12%, benefiting producers such as EQT Corp., which reported a significant 5.1% gain—making it the top performer among S&P 500 companies.
International indexes in Europe and Asia predominantly declined as well. The markets are approaching the conclusion of what has been a remarkable year characterized by robust economic growth, solid consumer spending, and a strong jobs market. Analysts anticipate that firms within the S&P 500 will report an earnings growth exceeding 9% for the year, with final assessments expected following fourth-quarter earnings reports set to begin in the coming weeks.
Cooling inflation throughout the year has buoyed Wall Street’s optimism, as it has brought the inflation rate closer to the Federal Reserve’s target of 2%. This has spurred hopes for a series of interest rate cuts that could reduce borrowing costs and spur further economic expansion. The Federal Reserve has implemented three interest rate cuts in 2024 but has indicated a need for caution as it approaches 2025, given persistent inflation concerns and a slight uptick in prices noted in the latest consumer price report, which showed inflation rising to 2.7% in November.
Further concerns regarding inflation have been exacerbated by tariff threats from the incoming president, which could lead to companies passing increased costs onto consumers. Typically, U.S. stock indexes receive an end-of-year lift—often described as a ‘Santa Claus’ rally—but the current trend of declines weakens this expectation.
“The anticipated ‘Santa Claus rally’ may have occurred earlier in November,” remarked Keith Buchanan, a senior portfolio manager at Globalt Investments. “This week is likely to see continued drifting, irrespective of whether the movement is upwards or downwards.” With limited corporate and economic news available this week due to the New Year holiday (with markets closed on Wednesday), investors await data on U.S. construction spending from November scheduled for Thursday, followed by a manufacturing update for December on Friday.
