Before we start your new (trading/investing) year on a sour note, allow us to remind you that the major indices have a nine-week winning streak. That streak has produced some massive gains, which led to the happiest end of the old year.
Briefly, the Nasdaq Composite soared 43.4% in 2023, the S&P 500 surged 24.2%, the Russell 2000 was up 15.1%, the S&P Midcap 400 rose 14.5%, and the Dow Jones Industrial Average gained 13.7%.
Now, for the sour news: the S&P 500 futures are down 38 points and are trading 0.7% below fair value, the Nasdaq 100 futures are down 182 points and are trading 1.0% below fair value, and the Dow Jones Industrial Average futures are down 237 points and are trading 0.5% below fair value.
The major indices, therefore, will be starting 2024 on a down note — certainly at the start of today’s trading.
Notwithstanding the extended winning streak, we are not sure this negative disposition is all that surprising to market participants, who recognized that there was some performance chasing at the end of 2023 and that some profit taking was bound to happen in the wake of a parabolic advance.
Barclays has helped given market participants a profit taking nudge by downgrading Apple (AAPL) to Underweight from Equal Weight due in part to concerns about weak iPhone sales volumes.
Shares of AAPL are down 2.2% in pre-market trading. In fact, most of the mega-cap stocks are down in pre-market trading and that is taking its toll on the futures for the major indices.
You can sense this morning’s profit-taking urge, too, in the behavior of NVIDIA (NVDA) and Uber (UBER). Stifel named NVIDIA a “best idea” for 2024, but NVDA is down 0.3% in pre-market trading; meanwhile, Wells Fargo labeled Uber a “top pick,” yet UBER is down 1.1% in pre-market trading.
Another convenient reason for some of the early profit taking is the bump seen in Treasury yields. Recall that the Treasury market went on its own tear at the end of 2023, but it is starting 2024 on the defensive despite geopolitical tension in the Red Sea growing more tense after Iran sent a warship there in response to the U.S. destroying three Houthi boats.
WTI crude futures are up 2.3% to $73.27/bbl.
Currently, the 2-yr note yield is up 10 basis points to 4.35% and the 10-yr note yield is up nine basis points to 3.97%. The U.S. Dollar Index, however, looks to be reflecting a bit more of the geopolitical angst. It is up 0.7% to 102.05.
The Treasury market should be a hotbed of trading interest this week, which will also feature the release of the December ISM Manufacturing Index, JOLTS – Job Openings Report, and the FOMC Minutes on Wednesday followed by the December Employment Situation Report and ISM Non-Manufacturing Index on Friday.
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Originally Posed January 2, 2024 – Market downshifts to start 2024
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