NEW YORK — U.S. stock indexes retreated on Tuesday, erasing part of the remarkable gains accumulated throughout the year.
The S&P 500 dropped 0.4%, although it remained close to the record highs achieved earlier this month. The Dow Jones Industrial Average lost 267 points, or 0.6%, and the Nasdaq composite gave back 0.3% from its all-time high set just the day before.
Nvidia’s Stock Dips Again, Affecting Wall Street’s Momentum
Nvidia, one of the key drivers of Wall Street’s historic gains in 2024, saw a 1.2% decline, marking its eighth loss in the past nine trading days. The stock has fallen more than 12% from its peak last month, as its once-unstoppable growth momentum starts to slow.
While Nvidia’s stock has been a major contributor to the market’s record-breaking performance, analysts have warned that the stock’s valuation has reached such high levels that only perfect execution from the company could justify its current price.
Global Fund Managers Adjust Their Portfolios
According to Bank of America’s recent survey, global fund managers have been increasingly moving their funds into U.S. stocks, reducing their cash reserves. The survey revealed that many managers are holding a notably small percentage of their portfolios in cash, reminiscent of market conditions in 2002 and 2011, which preceded tougher times for riskier investments.
Michael Hartnett, strategist at BofA Global Research, noted that the survey’s broader measure of optimism, which gauges expectations for economic growth and other indicators, is at its highest level since August 2021. This uptick in optimism could signal caution for contrarians.
U.S. Stock Market Performance in 2024
The S&P 500 is on track to achieve one of its best years in recent history, up nearly 27%. The U.S. economy has proven to be remarkably resilient, fueling optimism that President-elect Donald Trump’s policies will stimulate growth without significantly exacerbating inflation. Additionally, the Federal Reserve has started easing its policies by reducing interest rates from a two-decade high, which has further supported the bullish market sentiment.
Fed’s Upcoming Decision: Rate Cuts Expected
The Federal Reserve is widely expected to announce its third interest rate cut of 2024 on Wednesday, along with projections for future rate moves. While expectations for more rate cuts have been tempered recently due to persistent inflationary pressures, Tuesday’s report showing stronger-than-expected retail sales suggests that the economy may not require as much stimulus. Strong economic data could make a pause in rate cuts more likely in January, according to Chris Larkin, managing director at E-Trade from Morgan Stanley.
Bond Market Holds Steady Amid Economic Data
Following the retail sales report, Treasury yields remained relatively stable. The 10-year Treasury yield held steady at 4.40%, while the two-year yield, which more closely tracks the Fed’s actions, slightly decreased to 4.24% from 4.25%.
Key Stock Movers: Broadcom, Pfizer, and More
- Broadcom: Shares fell 3.9%, marking its first loss after two impressive rallies. The semiconductor company had surged 24.4% and then 11.2% following its strong earnings report and optimistic revenue forecast, driven by demand for artificial intelligence products.
- Nvidia: The tech giant also weighed heavily on the S&P 500, as mentioned earlier.
- Pfizer: Stock rose 4.7%, bolstered by a stronger-than-expected profit forecast for the upcoming year. Other pharmaceutical stocks, such as Bristol-Myers Squibb, also saw gains.
All told, the S&P 500 dropped 23.47 points to 6,050.61. The Dow Jones Industrial Average fell 267.58 points to 43,449.90, and the Nasdaq composite dipped 64.83 points to 20,109.06.
Global Stock Markets
- London’s FTSE 100: Dropped 0.8% ahead of an expected interest rate decision from the Bank of England on Thursday.
- Japan’s Nikkei 225: Fell 0.2%, as the Bank of Japan moves towards raising interest rates after keeping its policy rate below zero for years.
Bitcoin’s Volatility
Bitcoin briefly surged to a record high above $108,000 before retreating to around $106,500, according to CoinDesk. The cryptocurrency has had a remarkable rise this year, jumping from approximately $44,000 at the start of 2024, fueled by expectations that President-elect Trump’s policies could favor digital currencies.
Source: AP News
Leave a comment