On December 27, U.S. stocks opened low and fell further, with major indices collectively closing lower. The Dow Jones Industrial Average fell 333.59 points, or 0.77%, to 42,992.21 points; the Nasdaq dropped 298.33 points, or 1.49%, to 19,722.03 points; the S&P 500 index decreased by 66.75 points, or 1.11%, to 5,970.84 points. Despite a poor performance on Friday, all three indices recorded gains for the week, with the Dow up 0.35%, the Nasdaq up 0.76%, and the S&P 500 up 0.67%.
Technology Stocks Mostly Declined
Major technology stocks broadly fell on Friday, with Tesla down 4.95% and Nvidia dropping more than 2%. Apple, Microsoft, Netflix, Google, and Amazon all declined by more than 1%, while Intel and Meta saw slight decreases. The weakness in the tech sector was a major driving force behind the market decline.
Economic Data Influences Market Expectations
Data showed that regular U.S. unemployment benefit claims rose to the highest level in more than three years, indicating it takes longer for the unemployed to find new jobs. However, initial unemployment claims fell to 219,000, below expectations. Analysts noted that these figures did not significantly alter market expectations for Federal Reserve policy, as investors are reassessing market trends post-holiday.
Bond Yields and Dollar Strongly Rise
In the bond market, driven by Federal Reserve rate hike expectations, the 10-year U.S. Treasury yield climbed to 4.607% on Friday, its highest since May. The two-year Treasury yield also rose to 4.33%. Meanwhile, U.S. debt trends also pushed Eurozone bond yields upward, with the German 10-year bond yield rising 5 basis points to 2.372%.
The dollar continued to perform strongly, with the dollar index rising 0.08% to 108.16, approaching a monthly increase of 2.2%, and is expected to rise 6.6% for the year—its best performance since 2015. The dollar's increase against the yen is nearly 5.5% this month and may reach 11.8% for the year, while the euro approaches a two-year low.
Fed Policy Becomes Focus
Federal Reserve Chairman Powell previously stated he would remain cautious regarding interest rate cuts. Although the market expects the Fed to cut rates by 37 basis points in 2025, there is virtually no pricing in of rate cuts before June 2024. Additionally, the European Central Bank is expected to lower the deposit rate to 2% to address the Eurozone's economic slowdown.
Market Outlook and Analysis
Wells Fargo warned that although U.S. stocks performed well overall in 2024, there might be short-term corrections, with the S&P 500 potentially dropping 7%. The bank pointed out that the disconnect between U.S. stocks and economic data has intensified and that optimism following the presidential election may impact the stock market.
Investors need to pay attention to upcoming economic data, bond market volatility, and the further impacts of Federal Reserve policy on the markets. As the holiday season ends, market sentiment may gradually become clearer, but short-term volatility risks should not be ignored.
