Wall Street veered lower on Monday in light volume at the top of a holiday-shortened week in the second-to-last trading session of an eventful year in which all three indexes posted strong double-digit gains.
End-of-year tax positioning, valuations, climbing Treasury yields and uncertainties about 2025 all convinced investors to sell. The three major U.S. stock indexes bounced off early lows but still were down more than 0.5%.
The broad selloff dragged 10 of the 11 major S&P 500 sectors into negative territory for the session.
“Investors are saying the S&P, even after this recent sell off, is up over 50% in the last two years,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “Maybe we should take some chips off the table and protect those gains. And when you have thin volume, it doesn’t take a lot (to move markets).”
Despite recent weakness, 2024 has been a banner year for U.S. equities. The Nasdaq is on track for a 29% annual gain and the S&P 500 is headed for a 23% rise for 2024. The Dow was last up more than 12% since the last closing levels of 2023.
On the sector level, technology (.SPLRCT), opens new tab, communication services (.SPLRCL), opens new tab and consumer discretionary (.SPLRCD), opens new tab were on course to notch gains of nearly 30% or more, while materials (.SPLRCM), opens new tab appear poised to nab the dubious distinction of the only sector to have lost ground on the year.
It was a year during which geopolitical tensions came to a boil in the Middle East and elsewhere, while the Federal Reserve cut U.S. interest rates for the first time in over four years.
In U.S. politics, former President Donald Trump was convicted of 32 felonies early in the year, then won re-election to a second term after President Joe Biden dropped out of the race to be replaced as Democratic candidate by Vice President Kamala Harris.
Chip maker Nvidia’s (NVDA.O), opens new tab stock shot up nearly 180% this year as investors placed heavy bets on the promise of emergent artificial intelligence (AI) technology.
“Next year is going to be much more volatile for investors, in particular in the first quarter,” Pursche added. “However, I do think there’s a good chance of stocks doing reasonably well and having mid-single-digit returns next year.”
“The combination of likely lower taxes and a friendlier regulatory environment is likely to result in stocks rising well beyond fair valuations,” Pursche said, citing investor expectations that Trump will deliver on his campaign promises.
The Dow Jones Industrial Average (.DJI), opens new tab fell 251.75 points, or 0.59%, to 42,741.60, the S&P 500 (.SPX), opens new tab lost 36.43 points, or 0.61%, to 5,934.41 and the Nasdaq Composite (.IXIC), opens new tab lost 120.13 points, or 0.61%, to 19,601.59.
Of the 11 major sectors of the S&P 500, all but energy (.SPNY), opens new tab were in negative territory. Consumer discretionary (.SPLRCD), opens new tab had the largest percentage loss, falling 1.1%
Boeing (BA.N), opens new tab shares fell 1.6% after South Korea’s acting president Choi Sang-mok ordered an emergency safety inspection of its entire airline operation following the deadliest air accident in that country’s history, involving a Boeing 737-800.
Crypto stocks including MicroStrategy (MSTR.O), opens new tab Coinbase (COIN.O), opens new tab and MARA Holdings (MARA.O), opens new tab tumbled from 3.4% to 4.1%, tracking bitcoin weakness.
Biden declared a national day of mourning on Thursday Jan. 9 to mark the death on Sunday of former President Jimmy Carter.
The U.S. stock market will be closed that day.
Declining issues outnumbered advancers by a 1.58-to-1 ratio on the NYSE. There were 41 new highs and 208 new lows on the NYSE.
On the Nasdaq, 1,657 stocks rose and 2,663 fell as declining issues outnumbered advancers by a 1.61-to-1 ratio.
The S&P 500 posted no new 52-week highs and 15 new lows while the Nasdaq Composite recorded 51 new highs and 103 new lows.
“We consider the news a step in the right direction for GM, as we think investors were losing patience with its hefty spending (~$10B) related to robotaxi development with very little to show for its investment,” Garrett Nelson, analyst at CFRA Research wrote.
GM shares jumped 3% after-hours on Tuesday immediately after the announcement, but gave back those gains during Wednesday’s regular session and were down about 1% in late afternoon.
Nelson said the announcement was “a black eye for the credibility of GM management that, as recently as last year, told investors the Cruise business could generate $50 billion in annual revenue by 2030.”
For the year to date, GM has far outpaced its competitors. Its stock is up 45% for 2024, while Ford’s is down 14% and Stellantis is down 37%.
GM CEO Mary Barra was already scheduled to speak with reporters Wednesday evening. She will likely face questions on cost-cutting moves the automaker is taking as it navigates turbulence in EV demand, changing technology and a new presidential administration.
“This is the latest in the series of decisions that GM has announced which underscore our focus on having the right technology for the future of our company and the industry and reflects our commitment to execute with speed and efficiency,” Barra told analysts Tuesday.
GM recently scaled back plans for electric vehicles, sold a stake in one of its joint venture battery plants and recorded a $5 billion loss on its China business as it restructures. GM is now doubling down on its core business: making gasoline-powered pickup trucks and other large vehicles.
Cruise’s competitors - including Alphabet’s Waymo, Baidu and Tesla - are well funded, and may have better technology, analysts said. Waymo, which is expanding its autonomous ride-hailing services, is still losing billions of dollars per year.
Barclays noted Alphabet, which has over $100 billion in earnings annually, can absorb costs associated with Waymo’s development. GM, however, is expected to record earnings of $14 billion to $15 billion for 2024.
“It’s clear from Waymo that an AV robotaxi business isbest owned by an entity with deep pockets,” Barclays said.
Bank of America expects regulatory changes under President-elect Donald Trump to favor mergers and acquisitions among companies, including banks, CEO Brian Moynihan said on Wednesday. “Regulatory changes will be favorable for the ability to get deals done,” Moynihan told investors at the Goldman Sachs Financial Services conference.
His comments echoed bullish commentary from rivals across Wall Street, including Goldman Sachs and JPMorgan this week.
Equity capital markets are seeing a little more activity, which will ultimately boost initial public offerings, Moynihan said.
“That’s going to take a little bit of sort of valuation alignment ultimately for the IPOs to get out, do well, and then others will follow,” he said.
The bank could see a 25% rise in investment banking fees in the fourth-quarter from a year earlier, while wealth management fees could grow 20%, Moynihan said. Trading revenue could hit a record, he said.
Moynihan said he felt confident about fourth-quarter target for net interest income (NII) - the difference between what they earn on loans and pay out for deposits. That number will continue to grow in 2025, he said.
The bank had forecast NII to be $14.3 billion or above in the fourth quarter.
“We’re seeing loan growth so far that would analyze out to 4%, 4% plus, better than what we see in the industry... So we’re growing faster in the economy,” he said.
The consumer was resilient and businesses were doing well, Moynihan said.
The recent rally in bank stocks is “really, really rational,” the CEO said, drawing laughter from attendees.
He cited the U.S. interest rate and growth outlook as constructive factors for the industry.
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