International equities declined on Thursday as initial advances dissipated, carrying the end-of-year decline into the first trading day of the new year, while the dollar reached a two-year peak following economic reports suggesting a robust U.S. labor market.
On Wall Street, U.S. stocks experienced widespread losses after early gains, with the S&P 500 facing its fifth consecutive daily drop, marking its longest losing streak since April.
The U.S. Labor Department disclosed that the number of Americans applying for new unemployment benefits fell to an eight-month low of 211,000 last week, falling short of the 222,000 forecasted by economists surveyed by Reuters.
“The labor market has shown remarkable strength, and this trend continues,” stated Keith Buchanan, senior portfolio manager at GLOBALT Investments in Atlanta. “Ultimately, it’s the labor market that has energized the consumer, which has sustained this economy through the last three years of battling inflation.”
Declines on Wall Street were spearheaded by the consumer discretionary sector (.SPLRCD), which was pressured by approximately a 6% drop in Tesla (TSLA.O), following the electric vehicle manufacturer’s first annual delivery drop.
The Dow Jones Industrial Average (.DJI), opens new tab decreased by 269.84 points, or 0.63%, settling at 42,274.38; the S&P 500 (.SPX), opens new tab decreased by 34.79 points, or 0.59%, to 5,846.67; and the Nasdaq Composite (.IXIC), opens new tab dropped by 120.55 points, or 0.63%, to 19,188.71.
European stocks finished higher following a slow session start, buoyed by gains in the energy sector (.SXEP), opens new tab.
MSCI’s index of global stocks (.MIWD00000PUS), opens new tab fell 4.08 points, or 0.48%, to 837.34. Europe’s STOXX 600 (.STOXX), opens new tab index increased by 0.6%.
On Thursday, the dollar surged to a two-year high, extending strong gains from 2024 as expectations that U.S. economic growth will surpass that of other countries solidified, keeping the Federal Reserve on a gradual interest rate-cut trajectory.
The dollar index, which evaluates the dollar against a range of currencies including the yen and the euro, increased by 0.77% to 109.37, after reaching 109.54, its highest point since November 10, 2022.
“When it comes to economic growth in 2025, the dollar has no competition,” remarked Adam Button, chief currency analyst at ForexLive in Toronto.
“Capital flows dictate the start of the year, and the U.S. stock market is outshining every other global market,” Button commented. “Until there’s a substantial setback in the U.S. economy, the dollar is the only option available.”
The euro dipped by 1.01% to $1.025 after plunging to $1.0223, its lowest since November 21, 2022.
In comparison to the Japanese yen, the dollar rose by 0.44% to 157.56. The British pound fell by 1.23% to $1.2363, heading towards its most significant daily percentage decline since November 6.
Stocks experienced a downturn leading up to year-end, affecting a year-long rally driven by optimistic growth related to artificial intelligence, anticipated Federal Reserve rate cuts, and more recently, expectations of deregulation under the incoming Trump administration.
However, the latest economic outlook from the Fed, combined with concerns that President-elect Donald Trump’s policies, like tariffs, may exacerbate inflation, has pushed yields higher and posed challenges for equity markets.
The yield on the benchmark U.S. 10-year notes slightly decreased by 0.6 basis points to 4.571%, yet it stayed above the 4.5% threshold that analysts regard as troubling for stocks.
Oil prices rose, with U.S. crude climbing 1.94% to $73.10 a barrel, and Brent reaching $75.88 per barrel, an increase of 1.67%, on optimism regarding China’s economic recovery and fuel demand after a commitment from President Xi Jinping to enhance growth.
