Wall Street Update: US stocks continue to face light holiday trading, with Nvidia’s performance weighing down the market
Wall Street Today: US stocks dropped on Friday, December 27, with major indices opening lower, disrupting what initially appeared to be a “Santa Claus” rally during the holiday-shortened week. The S&P 500 fell 1.4%, with more than 80% of its constituents declining. Despite this, the key US indices are still set to record a modest 1% gain for the week.
The Dow Jones Industrial Average dropped 402 points, or 0.9%, closing at 42,945, while the Nasdaq composite declined by 2%. Both the Dow and Nasdaq are holding onto their weekly gains. In light trading, the 10-year Treasury yield ticked up slightly but remained below the near-eight-month high reached on Thursday, while shorter-term Treasury yields eased.
The Dow has risen 14% in 2024, while the tech-heavy Nasdaq has gained 30%. These gains have been fueled in part by positive economic data, indicating continued consumer spending and a strong labor market. Although inflation remains elevated, it has been gradually easing.
The US dollar index, which tracks the currency against six major counterparts, was on track for an annual gain of nearly seven percent. Meanwhile, Japan’s yen was poised to record its fourth consecutive year of losses, as traders anticipated strong US growth. The euro, up by 0.09 percent, remained near two-year lows.
The incoming administration of US President-elect Donald Trump is expected to implement tax cuts, tariffs, and deregulation, which economists believe will have both pro-growth and inflationary effects. This could make US Federal Reserve officials cautious about cutting rates in 2025. In Asia, Japan’s benchmark index rose as the yen remained weak against the dollar. Meanwhile, stocks in South Korea dropped after the main opposition party voted to impeach the country’s acting leader, while European markets saw gains.
Traders expect the Bank of Japan to maintain its accommodative monetary policy, while the European Central Bank (ECB) is anticipated to implement further rate cuts. Markets are pricing in 37 basis points of US rate cuts in 2025, with no cuts fully priced in until June. The ECB is likely to reduce its deposit rate by one percentage point to 2% as the eurozone economy slows.
Higher US rate expectations pushed the 10-year Treasury yield to its highest level since early May on Thursday, rising to 4.641%. It was last up 1.4 basis points at 4.595%.
In commodity markets, gold prices fell 0.84% to $2,612.20 per ounce but are on track for a 27% increase for the year, marking the strongest annual performance since 2011, driven by geopolitical tensions and inflation concerns.
Oil prices also looked set for a weekly gain as investors awaited news of potential economic stimulus efforts in China, the world’s largest crude importer. Brent crude futures rose 1% to $73.99 per barrel, up 1.5% for the week.
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