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U.S. stocks fell for a second straight session as investors capitalized on the stock market’s big rally in 2024.
Wall Street’s main stock benchmark, the S&P 500, fell 1.1% on Monday, while the tech-heavy Nasdaq Composite Index fell 1.2%. Stock prices also fell sharply on Friday, with investors selling off shares in large-cap tech stocks that had seen strong gains through much of 2024.
Monday’s declines were broad-based, with about 95% of stocks in the S&P 500 index declining, according to FactSet data. Aerospace group Boeing Co. fell 2.3% following the fatal crash of a 737-800 in South Korea over the weekend. U.S. airlines fell as well, with United Airlines down about 1.5%.
Investors continued to walk away from some of the year’s biggest gainers, including big tech companies such as chipmaker Broadcom, enterprise software group Oracle and personal computer maker Dell, as well as Elon Musk’s electric car maker Tesla. It fell because of this.
Despite Monday’s pullback, the S&P 500 is up 24% going into 2024, while the Nasdaq is up about 30%.
Thomas Lee of Fundstrat, a research firm, said the sell-off was a result of “profit taking” as investors rebalanced their portfolios at the end of a strong year. He noted that the Federal Reserve’s announcement earlier this month that it expects to cut interest rates by just two quarters next year (half its September forecast) also spooked investors.
Torsten Slok, chief economist at Apollo, echoed Lee’s sentiments, saying that concerns that interest rates will remain higher for longer than previously expected have been a driving force behind Wall Street’s rise in profits this year. The impact is particularly heavy on high-tech groups, he said.
The so-called Magnificent Seven – Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla – have led about half of the S&P 500’s gains this year, according to S&P Dow Jones Indices. I am doing it. All but Nvidia fell on Monday.
U.S. investors bought up government bonds on Monday, pushing the 10-year Treasury yield down 0.08 percentage point to 4.54%. Bond yields move inversely to prices.
More than $26 billion was drained from equity funds last week, according to data provider EPFR, including the largest outflow from a developed market stock fund in nearly two years. Investor outflows from crypto funds hit a record high, and technology funds recorded the longest streak of outflows since early 2023.
Investors also have about $2.1 billion invested in bond funds and about $29 billion in low-risk money market funds, according to EPFR data.
Michael Reynolds, vice president of investment strategy at Glenmede, said the market is in a holding pattern until new macroeconomic data, such as employment and inflation data, becomes available in early 2025.
“At the end of the quarter, and especially at the end of the year, there’s always some amount of investors tweaking their portfolios,” Reynolds said.
Trading volume is typically low during the last two weeks of the year, as many people on and off Wall Street take time off from work during the holiday season.
The New York Stock Exchange will be open on New Year’s Eve, but the bond market will have a shortened trading day and both will be closed on New Year’s Day.