The lackluster session follows a year where Wall Street's
three major indexes notched double-digit gains on the back of optimism around
artificial intelligence and stabilizing inflation. The S&P 500 ended last
week within 1% of a record closing high reached in early 2022.
However, equities were pressured on Tuesday as U.S. Treasury
yields climbed, with the yield on 10-year notes ticking above 4.000% to a
two-week high before easing slightly to 3.937%.
Such movement in Treasury yields reflected investors'
tempered expectations around cuts this year in U.S. interest rates. This, in
turn, weighed on growth stocks - among them tech stocks - which would benefit
from a more favorable rate environment.
Apple (AAPL.O) fell 3.6% after Barclays downgraded the tech
giant to "underweight", citing weakening iPhone demand. Other megacap
stocks also declined, including Nvidia (NVDA.O), Meta Platforms (META.O) and
Microsoft (MSFT.O), which slipped between 1.4% and 2.7%.
"Everyone was very excited by the tail-end rally, the
Fed - on the surface at least - paring back a little, and the fact we didn't
have a recession," said Jason Pride, chief of investment strategy &
research at Glenmede.
"But does that mean we're out the woods yet? I suspect,
even if the Fed brings rates down gradually, monetary policy is still tight and
still likely to be a hindrance to overall economic activity."
The Fed's December policy meeting minutes and a slew of
labor market data are on the roster for this week as market participants look
to ascertain the timing of potential rate cuts.
While the Fed is widely seen holding rates at its January
meeting, traders expect a near 70% chance of a 25-basis point cut in March,
according to the CME Group's FedWatch tool.
People walk around the New York Stock Exchange in New York,
U.S., December 29, 2023. REUTERS/Eduardo Munoz/File Photo Acquire Licensing
Rights
The S&P 500 (.SPX) lost 27 points, or 0.57%, to end at
4,742.83 points, while the Nasdaq Composite (.IXIC) lost 245.41 points, or
1.63%, to 14,765.94. The Dow Jones Industrial Average (.DJI) rose 25.5 points,
or 0.07%, to 37,715.04.
The S&P 500 sectors were mixed. Healthcare (.SPXHC) was
the brightest performer, with its 1.8% gain taking it to its highest close
since mid-December 2022. Moderna's (MRNA.O) 13.1% advance led the sector higher
after the vaccine maker was upgraded by brokerage Oppenheimer, and it
reiterated the company's goal of achieving sales growth in 2025.
The energy index (.SPNY) also rose 1.2% despite crude
slipping on concerns about the economic outlook.
Information technology (.SPLRCT) led decliners with a 2.6%
fall, the index's largest one-day drop since Aug. 2.
Tesla (TSLA.O) was flat despite saying it delivered a record
number of electric vehicles in the fourth quarter, beating market estimates and
meeting its 2023 target of 1.8 million vehicles.
Boeing (BA.N) dropped 3.4% after Goldman Sachs removed the
aerospace company from its "conviction list".
Meanwhile, Citigroup (C.N) advanced 3.1% to $53.04, its
highest finish since August 2022, after Wells Fargo raised its price target for
the bank to $70 from $60. Wells analyst Mike Mayo also said Citi was his top
pick among large banks in 2024, and he expects the stock to double to $100+
over the next three years.
Crypto-related stocks such as MicroStrategy (MSTR.O) gained
as bitcoin pierced above $45,000 for the first time since April 2022 on
optimism around the possible approval of exchange-traded spot bitcoin funds.
The volume on U.S. exchanges was 11.86 billion shares,
compared with the 12.4 billion average over the last 20 trading days. -Reuters