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US stocks dropped for the second straight trading session as investors cashed in on strong gains for equities markets in 2024.
The S&P 500, Wall Street’s main equities benchmark, fell 1.1 per cent on Monday, while the tech-heavy Nasdaq Composite dropped 1.2 per cent. Stocks had also pulled back significantly on Friday, with investors selling shares in large technology stocks that had posted big gains throughout much of 2024.
Monday’s decline was broad, with around 95 per cent of the stocks tracked by the S&P 500 falling, according to FactSet data. Aerospace group Boeing declined 2.3 per cent following a deadly crash of a 737-800 jet in South Korea at the weekend. US airlines fell as well, with United Airlines sliding by about 1.5 per cent.
Large tech companies, including chipmaker Broadcom, enterprise software group Oracle and PC maker Dell, as well as Elon Musk’s electric-car maker Tesla, also dropped as investors continued to shift away from some of the year’s biggest gainers.
The S&P 500 is still up 24 per cent in 2024 despite Monday’s pullback, with the Nasdaq up almost 30 per cent.
Thomas Lee, of research house Fundstrat, said the bout of selling was the result of “profit-taking” as investors recalibrated portfolios at the end of a strong year for equities. He noted that the Federal Reserve had also unnerved investors this month when it forecast just two quarter-point rate cuts next year — half of its September estimate.
Torsten Sløk, chief economist at Apollo, echoed Lee’s sentiment, saying that worries interest rates will remain higher for longer than previously anticipated had weighed down particularly heavily on tech groups, which have powered this year’s gains on Wall Street.
The so-called Magnificent Seven stock market behemoths — Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla — have driven about half of this year’s gains on the S&P 500, according to S&P Dow Jones Indices. All but Nvidia fell on Monday.
US investors bought up government debt on Monday, sending the yield on 10-year Treasury notes falling 0.08 percentage points to 4.54 per cent. Fixed income yields move inversely to prices.
More than $26bn flowed out of equity funds last week, including the largest outflow in about two years from developed market stock funds, according to data provider EPFR. Investor withdrawals from cryptocurrency funds hit a record high while technology funds marked their longest streak of outflows since early 2023.
Investors also put about $2.1bn into bond funds and parked nearly $29bn into low-risk money market funds, EPFR data showed.
Markets are in a holding pattern until new macroeconomic data, such as jobs and inflation figures, becomes available in early 2025, said Michael Reynolds, vice-president of investment strategy with Glenmede.
“There’s always some degree of investors fine-tuning their portfolios at the end of the quarter and particularly at the end of the year,” Reynolds said.
Trading volumes are typically light during the last two weeks of the year as many on and off Wall Street step away from work during the holiday season.
The New York Stock Exchange will be open on New Year’s Eve while bond markets will have a shortened trading day, and both will be closed on New Year’s Day.
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