Stock Market Deteriorates Over the Weekend on Wall Street.
Wall Street failed to build on its pre-holiday gains. With slim chances of swift additional interest rate reductions, US investors are offloading their assets. Tech stocks are taking the brunt of this sell-off.
End-of-week profit-taking led to losses on Wall Street, with tech stocks bearing the brunt. However, the indices managed to rebound slightly from their daily lows. Higher bond yields and low trading volumes due to holiday break contributions also dampened sentiment. The news cycle was quiet, with no major economic data or corporate events scheduled. The Dow Jones Index dipped 0.8% to 42,992 points. The S&P 500 declined 1.1%, and the Nasdaq Composite fell 1.5%. On the NYSE, 409 stocks (previously 1,670) rose, while 2,399 (originally 1,095) fell. 46 stocks (originally 51) remained unchanged.
Elevated bond yields weighed on investor sentiment. The yield on 10-year notes reached a multi-month high, surpassing 4.60%. Investors predict that the US Federal Reserve will slow down its interest rate hikes next year. Jobless claims data released on the previous day supported this prediction, showing a smaller-than-expected increase, indicating a steadier labor market.
Gold Price on a Downward Spiral
The dollar weakened despite the rise in market yields; the Dollar Index dropped 0.1%. The euro experienced a slight recovery due to the rise in bond yields in the Eurozone, but it was checked by France's expanding budget deficit, which is unlikely to be addresses by the new government as per Swissquote's analysis.
Oil prices saw an uptick. Brent and WTI futures climbed by up to 0.8%. Market participants cited the fifth consecutive weekly decline in US oil inventories and anticipated further economic stimulus from the Chinese government and an increase in Chinese oil demand.
The gold price sank. A troy ounce dropped 0.7% to $2,616. Pessimism about the likelihood of substantial US interest rate cuts next year has been pressuring gold prices throughout December. This pessimism is attributed to statements made by the US Federal Reserve and the inflationary initiatives proposed by the incoming US President Donald Trump. Long-term higher interest rates tend to diminish the allure of non-yielding gold.
Tech Stocks Experience Severe Losses
Tech stocks were hit the hardest. In the Dow Jones Index, shares of Nvidia, Apple, Amazon, and Microsoft slid between 1.3% and 2.0%. Tesla's stock saw further profit-taking, dropping for the second day in a row and shedding another 4.9%. On December 18, the stock reached a record high of $488.54. Since its rally following the US presidential election on November 6, the stock has risen by approximately 81%.
Biontech's ADRs rose by 0.2 percent. The vaccine manufacturer has settled patent disputes in the US with two settlements, paying a total of approximately $1.26 billion to the US health authority NIH and the University of Pennsylvania. This settlement includes retroactive licensing fees for Covid-19 vaccine patents jointly marketed with US partner Pfizer. Among small-caps, Grid Dynamics surged 7.7 percent. Its shares will be included in the S&P SmallCap 600 on January 2, replacing Revelyst**, which remained unchanged.
Viracta Therapeutics plummeted by 32.5 percent. The company suspended a clinical trial for a drug to treat certain lymphomas, citing financial reasons. Viracta is now considering "strategic options," which could include the sale of the company.
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Despite the recovery of some indices from their daily lows, sell-off pressure continues, especially on tech stocks. Other sectors, such as tech companies like Nvidia, Apple, Amazon, and Microsoft, are also experiencing significant losses. Investors are offsetting their positions in these companies due to various factors, including the anticipation of slower interest rate hikes.
Additionally, with pessimism surrounding potential substantial US interest rate cuts next year, other non-yielding assets, such as gold, are also seeing a decline in demand, leading to a decrease in their prices.
