Wall Street is closing out 2024 with a turbulent final trading week as major indices faced substantial declines on Monday morning, putting pressure on what has otherwise been an impressive year for investors. The Dow Jones Industrial Average shed 491 points, or 1.1 percent, and was down over 700 points at one point during the session.
The S&P 500 lost 1.2 percent, and the tech-heavy Nasdaq Composite fell 1.4 percent. This drop came without any apparent news catalyst and was expected as trading activity remained light due to the holiday season.
Despite the recent downturn, it’s important to note the overall performance throughout 2024, with the S&P 500 up more than 25 percent, the Nasdaq gaining over 30 percent, and the Dow rising about 14 percent. Analysts often note December can be influenced by what is commonly referred to as the "Santa Claus Rally," traditionally associated with the market rising during the last five trading days of December and the first two of January.
According to LPL Financial chief technical strategist Adam Turnquist, historical data shows the S&P 500 has risen, on average, 1.3 percent during this period since 1950, which contrasts sharply with its nearly flat performance this year. "The highly anticipated 'Santa Claus' rally has been non-existent so far," Turnquist remarked.
This year, the situation has been worsened by profits being taken off the table after strong performances from key stocks. Companies such as Tesla (TSLA) and Nvidia (NVDA) saw declines of 2.2 percent and 1.6 percent, respectively. With such prominent companies struggling, concerns are intensifying among investors about where the market might head next.
Highlighting concerns about the market moving forward, Jeremy Siegel, senior economist at WisdomTree, spoke on "Squawk on the Street," stating, "I really think we're going to take a pause this next year. The probability of a correction next year, defined as a 10 percent drop, is growing." Siegel noted the major forces propelling market growth might have already been leveraged.
Also weighing on investor sentiment, the 10-year Treasury yield, which hovered around 4.6 percent, has impacted stock prices. Higher yields frequently lead to lower stock valuations as investors weigh opportunities across asset classes, leading to the recent selloff.
Light trading volumes during this time typically exacerbate fluctuations, as Adam Crisafulli, founder of Vital Knowledge, noted: "Trading this week is characterized by extremely thin volume and liquidity, creating conditions for wild swings within stocks, both up and down. There’s just less activity to stabilize prices."
The markets are also reeling from disappointing economic data; this includes the Chicago purchasing managers' index for December, which fell short of expectations, showing signs of contraction within the economy. Economists had anticipated it would register 42.2 but instead it came out at 36.9.
Looking across the board, nearly all S&P 500 stocks were trading down, with more than 98 percent of its members showing losses on Monday. Enphase Energy was one of the biggest losers, down over 5 percent. There were some bright spots, with EQT and Coterra Energy both jumping over 3 percent each, proving gains can still be had even amid broader market declines.
Expert analysts are keeping close tabs on the effects of this week’s market activities. Fundstrat head of research Tom Lee suggested, "If the last week of December is weak, I actually think it bodes well for a rebound in the first week of January." Such remarks offer reassurance to jittery investors as they navigate the current volatility.
Adding to the recent market turbulence was the sad passing of former President Jimmy Carter, whose death at age 100 was officially announced Sunday evening by the Carter Center. Both the New York Stock Exchange and Nasdaq are set to close on January 9 to observe the National Day of Mourning for Carter. Lynn Martin, President of the NYSE Group, honored Carter's legacy of humanitarian service and expressed condolences on behalf of the markets.
Investors are now left to contend with mixed signals from the market as they view the performance of major indices leading up to the New Year. The Dow is down about 4.3 percent this month, headed for its worst monthly performance since April. Meanwhile, the S&P 500 is still on track for its best year since 2021, closing 2024 with strong performance but facing uncertainties as it heads toward 2025.
The backdrop of all this is the holiday; market participants are contending with thin trading conditions and the absence of significant economic data until early January. Should selling pressures continue, traders will be watching closely for what surprises the New Year may bring.