The primary indexes on Wall Street experienced a decline in the final trading session of 2024 as Treasury yields increased, yet the S&P 500 is poised to achieve its largest two-year gain in over twenty years.
Having risen more than 50% over the last two years, the index is currently trading close to its peak values, and both the Dow and Nasdaq are also on track for a second consecutive year of growth.
A nearly 100-basis point reduction in interest rates in 2024 by the Federal Reserve, along with a surge in technology stocks due to expectations of a boost in corporate earnings driven by artificial intelligence, has propelled stocks to unprecedented levels in 2024.
Stocks in technology (.SPLRCT), opens new tab, communications services (.SPLRCL), opens new tab, and consumer discretionary sectors (.SPLRCD), opens new tab have all witnessed increases exceeding 30% this year.
Despite Nvidia’s (NVDA.O), opens new tab incredible rise of over 170% this year being lower than last year’s surge, the increase has allowed the company to achieve a market valuation of $3 trillion, while Tesla (TSLA.O), opens new tab reclaimed the $1 trillion mark.
Nevertheless, tech stocks led the declines across sectors on Tuesday, while energy stocks (.SPNY), opens new tab gained more than 1% in line with rising crude prices.
At 11:58 a.m., the Dow Jones Industrial Average (.DJI), opens new tab decreased by 62.96 points, or 0.15%, to 42,510.29. The S&P 500 (.SPX), opens new tab lost 13.16 points, or 0.22%, reaching 5,893.78, and the Nasdaq Composite (.IXIC), opens new tab fell by 63.85 points, or 0.33%, to 19,422.94.
Nvidia saw a decline of 1.2%, while the auto manufacturer led by Elon Musk fell 0.3%. The market is anticipated to be influenced by limited trading volumes as the New Year’s holiday approaches on Wednesday.
As the year concludes, there was an uptick in risk appetite as Donald Trump’s presidential victory heightened expectations that he would fulfill promises to relax regulations, reduce taxes, and impose tariffs to support domestic industries.
His victory also benefited small-cap stocks. The Russell 2000 (.RUT), opens new tab achieved a historic high and is on track for a second consecutive year of gains with a 10% rise. Bank stocks (.SPXBK), opens new tab have risen approximately 34% this year.
However, equities experienced challenges in December, leading the S&P 500 to its largest monthly drop since April as Treasury yields rose amidst stretched equity valuations and the Fed’s concerns about potential inflationary pressures from Trump’s policies.
Investors are anticipating the first rate cut of 2025 in either March or May.
“The market will likely face increased volatility in 2025 as it appears to be overpriced. We might see additional profit taking next year,” stated Sam Stovall, chief investment strategist at CFRA Research.
“Investors will ultimately see another fruitful year, but it’s likely to be a turbulent journey.”
In the meantime, Trump’s victory has revitalized cryptocurrency stocks, with Bitcoin reaching $100,000.
MicroStrategy (MSTR.O), opens new tab shares have surged over 300% this year as it continues to acquire and hold bitcoin. The stock decreased by 1.9% on Tuesday, while Coinbase (COIN.O), opens new tab and MARA Holdings (MARA.O), opens new tab fell by 1.3% and 1%, respectively.
Other segments of the market, however, have experienced annual losses, with materials stocks (.SPLRCM), opens new tab declining about 2%, impacted by economic challenges in China, the world’s largest metals consumer.
Advancing stocks outnumbered declining ones by a ratio of 1.75-to-1 on the NYSE and by a ratio of 1.04-to-1 on the Nasdaq.
The S&P 500 achieved two new 52-week highs and no new lows, while the Nasdaq Composite recorded 35 new highs and 42 new lows.
