“Market Mirage: Investors Reap Whirlwind Gains as U.S. Stocks Make a Stunning Comeback in 2024”
U.S. Stocks Experience Second Straight Session of Decline Amid Profit Taking and Rate Hike Concerns
The U.S. stock market experienced a second straight session of decline on Monday, with investors selling off shares in a broad-based sell-off. The S&P 500 fell 0.7% in afternoon trading, while the tech-heavy Nasdaq fell 0.8%. The decline was fueled by profit taking and concerns over the Federal Reserve’s forecast of only two-quarter percentage points of rate cuts next year.
The sell-off was broad-based, with around 90% of stocks tracked by the S&P 500 falling in value. Boeing Co, the aerospace group, fell 2% after a fatal crash involving a 737-800 jet in South Korea over the weekend. U.S. airlines also posted declines, with United Airlines falling by a similar amount.
Big tech companies, including chipmaker Broadcom, enterprise software group Oracle, and PC maker Dell, also fell as investors continued to pull money from some of the year’s biggest gainers. Elon Musk’s electric car maker Tesla fell along with the others. Despite the decline, the S&P 500 is still on track to gain 24% in 2024, and the Nasdaq is up nearly 30%.
The sell-off was attributed to “profit taking” as investors rebalanced their portfolios at the end of a strong year for stocks. Apollo chief economist Torsten Sløk agrees, saying that concerns that interest rates would remain higher for longer than previously expected were weighing on tech groups. The pressure has been particularly severe, and technology groups have driven gains on Wall Street this year.
The so-called Big Seven stock market giants – Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia, and Tesla – have driven about half of the S&P 500’s gains this year, according to S&P Dow Jones Indices. All companies except Nvidia were down on Monday.
Meanwhile, fixed income yields fell on Monday, with the 10-year Treasury yield falling 0.06 percentage point to 4.56%. Investors also poured about $2.1 billion into bond funds and nearly $29 billion into low-risk money market funds, according to data from EPFR.
FAQ:
Q: What caused the decline in the U.S. stock market?
A: The decline was caused by profit taking and concerns over the Federal Reserve’s forecast of only two-quarter percentage points of rate cuts next year.
Q: Which tech companies fell?
A: Tech companies including Broadcom, Oracle, Dell, and Tesla fell as investors continued to pull money from some of the year’s biggest gainers.
Q: Why were investors selling?
A: Investors were selling due to concerns that interest rates would remain higher for longer than previously expected, and to rebalance their portfolios at the end of a strong year for stocks.
Q: How did fixed income yields respond?
A: Fixed income yields fell on Monday, with the 10-year Treasury yield falling 0.06 percentage point to 4.56%.
Conclusion:
The decline in the U.S. stock market on Monday is a natural reaction to a strong year for stocks. Investors are rebalancing their portfolios and taking profits on some of the year’s biggest gainers. Despite the decline, the S&P 500 is still on track to gain 24% in 2024, and the Nasdaq is up nearly 30%. As the year comes to a close, investors can expect more volatility in the market, but long-term investors should remain focused on their overall investment strategy rather than short-term market fluctuations.
