Why the S&P 500 and Nasdaq Futures Are Struggling at the Start of 2024’s Final Week
Stock Market Trends: The stock market started the final trading week of 2024 with a decline in futures. The S&P 500 futures fell around 1%, while Nasdaq futures dropped 1.1%, and Dow Jones futures slid 0.8%. This downturn comes amid rising concerns about higher Treasury yields, with the 10-year yield hovering near a 7-month high of 4.6%. Higher yields tend to make bonds more attractive than stocks, prompting investors to pull back from equities.
The broader market’s struggles were reflected in last week’s performance, where major tech stocks like Tesla and Nvidia saw significant drops. The Nasdaq Composite fell 1.5%, and the S&P 500 dropped over 1%, signaling a challenging end to 2024.
Adding to this pressure is the underwhelming performance of the so-called “Santa Claus” rally, a historically strong period for the market between Christmas and New Year’s. Typically, this stretch has seen consistent gains, but this year, the S&P 500 has barely moved, failing to meet its usual growth during this period.
Despite the recent dip, the broader market picture for 2024 remains strong, with the S&P 500 up over 25%, the Nasdaq gaining 30%, and the Dow up 14%. While the final days of December may not deliver the typical holiday rally, investors are looking to the strong overall gains of the year as a sign of resilience in the market.
However, the combination of rising yields and disappointing short-term performance leaves many wondering how the markets will finish out 2024 and what challenges might lie ahead in the new year.
The ‘Santa Claus’ Rally: Why 2024’s Holiday Stock Performance Is Falling Short
The “Santa Claus rally” is a well-known phenomenon in the stock market, typically occurring during the last week of December and into the new year. Historically, the S&P 500 has seen positive gains during this period, with an average return of 1.3% since 1950.
This rally is considered one of the most reliable trends of the year, as investors often expect year-end optimism, including strong retail sales, tax-loss harvesting, and institutional repositioning.
However, in 2024, the anticipated rally has faltered. Instead of the typical rise, the S&P 500 has barely moved, down less than 0.1% during the usual seven-day rally period starting on December 24. This lackluster performance is partly attributed to broader economic concerns, including rising Treasury yields, which reached a 7-month high at 4.6%. Higher yields can make bonds more attractive relative to stocks, dampening investor enthusiasm for equities.
Additionally, major tech stocks such as Tesla and Nvidia, which have been key drivers of the market’s growth in recent years, have experienced significant declines. This has weighed heavily on the performance of the tech-heavy Nasdaq index, which dropped 1.5% last week.
Despite this holiday slump, the broader picture for 2024 remains positive. The S&P 500 is up over 25% for the year, and the Nasdaq has gained over 30%, showcasing the market’s overall strength. While the traditional year-end rally has failed to materialize this time, the strong gains earlier in 2024 leave investors hopeful that the market’s upward momentum will continue into the new year, despite the current short-term setbacks.
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Treasury Yields and Their Impact on Stock Market Performance: A Closer Look
Rising Treasury yields have become a key factor influencing stock market performance in recent weeks. The 10-year Treasury yield reached a 7-month high of 4.6%, prompting concerns among investors. Typically, higher yields make bonds more attractive relative to stocks, leading to a shift in investor behavior. As yields rise, bonds offer higher returns, which can draw capital away from equities, especially those in growth sectors like technology.
This shift has contributed to the recent weakness in stock futures. On Monday, the S&P 500 futures fell by 1%, while Nasdaq futures dropped by 1.1% and Dow Jones futures declined by 0.8%. The pressure from rising yields has been particularly evident in the tech-heavy Nasdaq, which is more sensitive to changes in interest rates. Stocks of major tech companies like Tesla and Nvidia, which had driven market growth throughout the year, have also faced declines.
The increase in Treasury yields is largely due to concerns about inflation and the Federal Reserve’s response. Higher interest rates, implemented to combat inflation, tend to push up bond yields. While higher rates are designed to cool the economy, they also increase borrowing costs for businesses, potentially impacting their growth prospects and profitability. This uncertainty can dampen investor confidence in the stock market.
Despite these challenges, the broader market performance for 2024 remains strong. The S&P 500 has gained over 25%, the Nasdaq has risen by more than 30%, and the Dow has increased 14%. While the rise in Treasury yields has created short-term headwinds, the overall market outlook for the year remains positive, with investors keeping an eye on the balance between inflation, interest rates, and stock market growth.
2024 Stock Market Trends: Big Gains Despite Year-End Slump
Despite recent challenges in the stock market, 2024 has been a strong year overall. The S&P 500, Nasdaq, and Dow Jones all posted significant gains, with the S&P 500 up more than 25%, the Nasdaq gaining over 30%, and the Dow rising by 14%. These gains highlight a year of resilience and growth, even as some end-of-year market trends, such as the “Santa Claus rally,” have underperformed.
The positive performance has been driven by a variety of factors, including strong corporate earnings, investor optimism, and economic recovery post-pandemic. The technology sector, in particular, has been a key contributor, with major companies like Tesla and Nvidia propelling the Nasdaq to impressive heights. Despite some recent declines in these tech stocks, the broader market has largely benefited from their earlier gains.
However, as the year draws to a close, the market has faced some headwinds. Rising Treasury yields, with the 10-year yield reaching 4.6%, have raised concerns, as higher yields can shift investor preference from stocks to bonds. This shift, along with a dip in major tech stocks, has weighed on the market in recent days. Additionally, the failure of the traditional “Santa Claus rally” to materialize has left investors wondering if the year-end momentum will carry through.
Despite these short-term dips, the overall market remains in positive territory, suggesting that 2024 will be remembered for strong growth. Investors are hopeful that, as we move into 2025, the market will continue to build on these gains, navigating challenges like inflation and interest rate fluctuations while sustaining long-term growth.
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What Jimmy Carter’s Passing Means for the U.S. Stock Market and Investor Sentiment
The death of former President Jimmy Carter at the age of 100 has captured national attention, but the immediate impact on the U.S. stock market appears to be minimal. While markets have historically shown some sensitivity to the passing of prominent figures, the broader economic context often overshadows such events in terms of market movements.
Carter’s passing may influence investor sentiment on a psychological level, evoking reflections on his presidency and legacy, but it is unlikely to trigger significant short-term changes in market direction.
In the context of 2024’s stock market, the death of Carter comes at a time when the market focus is more on economic data, interest rates, and corporate earnings. The rise in Treasury yields, hovering near a 7-month high, and the challenges faced by major tech stocks have been much more significant drivers of recent market trends. Additionally, the underperformance of the “Santa Claus rally” and the broader market’s volatility in the final days of the year have drawn more attention than news surrounding Carter.
However, events like Carter’s death can influence investor sentiment, potentially leading to more cautious behavior in the short term as people reflect on broader historical events. In the long run, though, market trends are driven by economic fundamentals, corporate performance, and investor expectations for future growth.
Stock Market Trends Final Thoughts
While Jimmy Carter’s death is a poignant moment in history, its immediate impact on the stock market is likely to be minimal. The focus remains on economic factors like rising yields, inflation, and corporate earnings, which will shape investor decisions as we enter 2025. The broader market’s strong performance in 2024 suggests that long-term growth remains a priority for investors, despite short-term uncertainties.
