On Monday, Wall Street shifted downward in thin trading at the beginning of a holiday-abridged week during the penultimate trading day of a remarkable year, where all three indexes recorded robust double-digit gains.
Factors such as end-of-year tax strategies, market valuations, rising Treasury yields, and uncertainties regarding 2025 led investors to decide to sell. Although the three primary U.S. stock indexes recovered from their early lows, they remained down over 0.5%.
The extensive sell-off pulled 10 of the 11 main S&P 500 sectors into negative territory for the trading day.
“Investors are recognizing that even after this recent decline, the S&P has increased by over 50% within the last two years,” remarked Oliver Pursche, senior vice president at Wealthspire Advisors in New York. “Perhaps it’s time to take some profits and safeguard those gains. In a low-volume environment, even minor actions can shift the markets.”
Despite the recent downturn, 2024 looks poised to be an exceptional year for U.S. equities. The Nasdaq is on track for a 29% annual increase, and the S&P 500 is anticipated to achieve a 23% gain for 2024. The Dow is also expected to rise over 12% since closing levels of 2023.
When examining sector performances, technology (.SPLRCT), opens new tab, communication services (.SPLRCL), opens new tab, and consumer discretionary (.SPLRCD), opens new tab are expected to achieve nearly 30% gains or more, while materials (.SPLRCM), opens new tab may become the only sector to record a loss for the year.
The year was marked by escalating geopolitical tensions in the Middle East and beyond, alongside the Federal Reserve reducing U.S. interest rates for the first time in over four years.
In U.S. politics, former President Donald Trump was found guilty of 32 felonies earlier in the year, subsequently winning re-election to a second term after President Joe Biden withdrew from the race, with Vice President Kamala Harris taking over as the Democratic nominee.
Shares of chip manufacturer Nvidia (NVDA.O), opens new tab soared by nearly 180% this year, reflecting significant investments in the emerging artificial intelligence (AI) technology sector.
“Next year is anticipated to create heightened volatility for investors, particularly in the first quarter,” Pursche added. “Nevertheless, I believe there’s a strong possibility for stocks to perform adequately and see mid-single-digit returns next year.”
“The potential for lower taxes combined with a more favorable regulatory environment is likely to enable stocks to surge beyond traditional valuations,” Pursche noted, referring to investor expectations that Trump will fulfill his campaign promises.
The Dow Jones Industrial Average (.DJI), opens new tab dropped by 251.75 points, or 0.59%, closing at 42,741.60, the S&P 500 (.SPX), opens new tab decreased by 36.43 points, or 0.61%, settling at 5,934.41, while the Nasdaq Composite (.IXIC), opens new tab fell 120.13 points, or 0.61%, ending at 19,601.59.
Among the 11 main sectors of the S&P 500, only the energy sector (.SPNY), opens new tab remained positive. Consumer discretionary (.SPLRCD), opens new tab experienced the most significant percentage drop, declining by 1.1%.
Boeing (BA.N), opens new tab shares slid 1.6% after an emergency safety inspection was ordered for its entire airline operation by South Korea’s acting president Choi Sang-mok following the deadliest aviation accident in the country’s history involving a Boeing 737-800.
Cryptocurrency stocks, including MicroStrategy (MSTR.O), opens new tab, Coinbase (COIN.O), opens new tab, and MARA Holdings (MARA.O), opens new tab, saw declines ranging from 3.4% to 4.1%, influenced by the weakness in bitcoin.
Biden has declared January 9 as a national day of mourning in honor of former President Jimmy Carter, who passed away on Sunday.
The U.S. stock market will be closed on that day.
On the NYSE, declining issues outnumbered advancers by a ratio of 1.58-to-1, with 41 new highs and 208 new lows reported.
On the Nasdaq, 1,657 stocks rose while 2,663 fell, resulting in a 1.61-to-1 ratio of declining issues to advancers.
The S&P 500 did not register any new 52-week highs and noted 15 new lows, whereas the Nasdaq Composite achieved 51 new highs and 103 new lows.
“We view the news as a positive step for GM, as we believe investors have been losing patience with its significant spending (~$10B) on robotaxi development with minimal returns,” stated Garrett Nelson, an analyst at CFRA Research.
GM shares initially surged 3% in after-hours trading on Tuesday following the announcement but relinquished those gains during Wednesday’s regular session, trending down about 1% in late afternoon trading.
Nelson characterized the announcement as “a significant blemish on GM management’s credibility, especially considering they had assured investors last year that the Cruise division could generate $50 billion in annual revenue by 2030.”
Year-to-date, GM has significantly outperformed its rivals, with its stock up 45% for 2024, while Ford’s shares have decreased by 14% and Stellantis’ shares are down 37%.
GM CEO Mary Barra was previously scheduled to address reporters on Wednesday evening, where she will likely face inquiries regarding the cost-cutting strategies the automaker is implementing amidst challenges with EV demand, evolving technologies, and a new presidential administration.
“This represents the latest in a series of announcements made by GM which highlight our commitment to ensuring we have the right technology for our future and the industry, reflecting our dedication to acting with agility and effectiveness,” Barra told analysts on Tuesday.
GM has recently reduced its electric vehicle initiatives, divested a stake in one of its joint venture battery production facilities, and recorded a $5 billion loss stemming from its operations in China as it undergoes restructuring. GM is now reinforcing its focus on its core business: manufacturing gasoline-powered pickup trucks and hefty vehicles.
Competitors of Cruise – such as Alphabet’s Waymo, Baidu, and Tesla – are well-capitalized and may possess superior technology, according to analysts. Waymo, which is expanding its autonomous ride-hailing offerings, continues to incur billions in annual losses.
Barclays indicated that Alphabet, which earns over $100 billion annually, has the financial capacity to absorb the costs associated with Waymo’s development. In contrast, GM is projected to earn between $14 billion to $15 billion in 2024.
“It’s evident that a robotaxi enterprise is best suited to a company with considerable financial reserves,” Barclays concluded.
Bank of America anticipates that regulatory shifts under President-elect Donald Trump will be advantageous for mergers and acquisitions among companies, including banking institutions, according to CEO Brian Moynihan on Wednesday. “We expect regulatory changes to be beneficial for facilitating deal-making,” Moynihan said during the Goldman Sachs Financial Services conference.
His remarks resonated with optimistic observations from competitors across Wall Street, notably Goldman Sachs and JPMorgan this week.
Equity capital markets are experiencing increased activity, which should eventually enhance initial public offerings, Moynihan stated.
“That process will require some alignment of valuations for IPOs to succeed, and subsequently, others will follow suit,” he said.
The bank could see a 25% increase in investment banking fees in the fourth quarter compared to the previous year, while wealth management fees might rise by 20%, Moynihan noted. Trading revenues are expected to reach record levels, he added.
Moynihan expressed confidence in the fourth-quarter outlook for net interest income (NII) – the differential between the earnings from loans and the costs of deposits. He asserted that this figure will continue to grow into 2025.
The bank predicted NII to exceed $14.3 billion in the fourth quarter.
“We are witnessing loan growth that projects around 4%, which is better than industry standards… indicating we are expanding more rapidly within the economy,” he stated.
According to Moynihan, both consumers are showing resilience and businesses are performing well.
He referred to the recent surge in bank stocks as “entirely logical,” sparking laughter among attendees.
He highlighted the U.S. interest rate outlook and growth potential as positive influences for the sector.
