Major U.S. stock indexes fell for the first week of 2024, ending a winning streak from late 2022 amid a continued tech selloff. Rising Treasury yields and concerns over future interest rate hikes from the Federal Reserve weighed on sentiment.
Indexes Post First Weekly Declines Since October
All three major U.S. stock indexes – the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite – declined for the week ending January 6th. This marked the first weekly losses for the benchmarks since October as a four-day slide in tech shares dragged markets lower.
The Nasdaq led declines with a 2.7% drop, posting its longest string of losses since November 2022. The S&P 500 fell 1.1% while the Dow lost just 0.3%.
Major Index Performance – Week Ended 1/6/2024
These losses erased solid gains from 2023 when the S&P 500 surged over 17%, the Dow added almost 9%, and the Nasdaq soared over 31%.
Treasury Yields Climb on Rate Hike Bets
A key factor pressuring stocks was a rise in Treasury yields as investors bet on further interest rate increases from the Federal Reserve.
The yield on the benchmark 10-year Treasury note topped 3.6% during the week, reaching its highest level since November 2022. Rising yields hurt pricey growth stocks, especially in areas like technology, as they reduce the value of future earnings.
Comments from Fed officials signaling rates may need to move higher than previously expected also drove yields up. Markets are now anticipating the Fed funds rate to peak around 5% in mid-2023 before cuts begin later in the year or in early 2024.
Tech Selloff Resumes Weighing on Indexes
The main drag on markets was another round of selling in technology and other high-growth stocks. Tech and consumer discretionary shares posted the steepest declines on the S&P 500 for the week.
Mega cap tech names like Apple and Microsoft posted weekly declines for a second straight week along with chipmakers Nvidia and AMD.
Notables Tech Stock Losses – Week Ended 1/6/2024
The tech-centric Nasdaq 100 index sank 3.9% for the week, registering its worst start to a year since 2016. Investors continue rotating out of expensive growth names that dominated returns in recent years.
Other formerly high-flying stocks like Tesla and Netflix also tumbled last week on growth concerns.
Outlook Murky but Opportunity Seen Long Term
With the Fed still focused on taming inflation, volatility is likely to pick up compared to the low levels seen for most of 2022. Treasury yields may continue pushing higher in the near term putting further pressure on rate-sensitive tech and growth shares.
Many Wall Street strategists remain cautiously optimistic longer term and view recent weakness as an opportunity.
“We see the recent pullback as offering longer-term investors a chance to favorably reposition portfolios,” noted analysts at investment firm LPL Financial.
UBS strategist Mark Haefele also sees chances to buy the dip over the next six to twelve months as stocks rebound and economic risks recede.
Still, uncertainty lingers regarding inflation’s path which will drive Fed policy. Continued volatility is expected through the first half of 2024 until more clarity emerges.
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