January 2, 2024 – 7:26 AM PST
(Reuters) – U.S. stocks fell on the first trading day of 2024 as Apple shares dipped on a broker downgrade and Treasury yields climbed after investors tempered expectations around interest-rate cuts this year.
Wall Street’s three major indexes notched monthly, quarterly and annual gains on Friday as traders priced in higher chances of rate cuts from the Federal Reserve this year. The S&P 500 ended last week within 1% of a record closing high reached on Jan. 3, 2022.
However, equities came under pressure on Tuesday as the yield on 10-year U.S. Treasury notes , the benchmark for global borrowing costs, ticked above 4.0000% to a two-week high, before easing to 3.9388%.
Megacap stocks including Nvidia (NVDA.O) and Microsoft (MSFT.O) shed 3.5% and 1.7%, respectively. Apple (AAPL.O) fell 3.3% after Barclays downgraded the tech giant to “underweight”, citing weaker iPhone demand.
“It’s day one after a tremendous run. When you think about what happened from the October lows to now, I would expect the first three months of this year to be tough and this week to be somewhat exemplary of that, with people taking profits, realigning portfolios,” said Phil Blancato, CEO of Ladenburg Thalmann Asset Management.
“It’s going to be about interest rates in these first few days of the year.”
The CBOE Volatility index (.VIX), also known as Wall Street’s fear gauge, touched a near two-week high at 14.23 points.
At 9:45 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 70.22 points, or 0.19%, at 37,619.32, the S&P 500 (.SPX) was down 34.90 points, or 0.73%, at 4,734.93, and the Nasdaq Composite (.IXIC) was down 224.07 points, or 1.49%, at 14,787.29.
Health stocks (.SPXHC) outperformed the 10 other S&P 500 sectors, rising 1%, while information technology (.SPLRCT) led declines with a 2.5% drop.
After optimism around artificial intelligence and stabilizing interest rates powered U.S. stocks in 2023, more inflation data and looming presidential elections will put further market gains to the test.
Weekly jobless claims, monthly private and non-farm payrolls data as well as services sector data are on the roster for the week. On Tuesday, the S&P Global’s final reading of U.S. manufacturing activity for December came in at 47.9, compared with earlier estimates of 48.2.
Market participants are also awaiting the Fed’s December policy meeting minutes, due on Wednesday, 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.
Companies linked to cryptocurrencies gained as bitcoin stormed above $45,000 for the first time since April 2022, on optimism around the possible approval of exchange-traded spot bitcoin funds.
Marathon Digital Holdings (MARA.O) and MicroStrategy (MSTR.O) jumped 8.9% and 13%.
Boeing (BA.N) shed 1.4% after Goldman Sachs removed the aerospace company from its “conviction list”.
Declining issues outnumbered advancers for a 1.81-to-1 ratio on the NYSE and a 1.61-to-1 ratio on the Nasdaq.
The S&P index recorded 10 new 52-week highs and no new lows, while the Nasdaq recorded 27 new highs and 15 new lows.
Reporting by Sruthi Shankar and Shristi Achar A in Bengaluru; Editing by Devika Syamnath