Traders work on the floor of the New York Stock Exchange (NYSE) on the last day of trading for the year on December 29, 2023 in New York City.
Spencer Platt | Getty Images News | Getty Images
Stocks fell Tuesday, the first trading day of the year, as interest rates rebounded slightly and investors took some money off the table following a surprisingly strong 2023 that saw the S&P 500 rally 24%.
The S&P 500 lost 0.7%, and the Nasdaq Composite pulled back by 1.5%. The Dow Jones Industrial Average dipped fractionally lower. Markets were closed Monday for New Year’s Day.
Apple shares led the pullback after Barclays downgraded the member of the Magnificent 7 market leaders basket to an underweight rating.
The stock market finished 2023 with a bang, as the S&P 500 climbed for nine weeks in a row to end the year, notching its best weekly win streak since 2004. Risk assets enjoyed a big relief rally as the economy remained resilient and inflation cooled, while the Federal Reserve signaled an end to rate hikes and forecasted rate cuts later this year. The market also endured a regional banking crisis as well as wars in Ukraine and the Middle East.
Technology shares, especially megacap stocks, led the 2023 advance with Apple soaring 48%, Microsoft surging nearly 57% and Nvidia skyrocketing 239%. The tech-heavy Nasdaq Composite ended the year up 43.4% for its best year since 2020.
That trend was reversing on Tuesday as the new year of trading began with those same stocks declining in early trading. Apple shares were down 2% after the negative call from Barclays. The firm said Apple could lose about 17% this year because of lackluster iPhone sales. Microsoft and Nvidia shares were also in the red in early trading.
The blue-chip Dow logged a 13.7% gain and notched a new record during 2023. Part of that rally was helped by a turn in interest rates. The 10-year Treasury yield had spooked investors by climbing above 5% at one point in October, before it topped out and closed the year out lower than 3.9%. On Tuesday, the 10-year yield was back up 7 basis points, approaching 4% again. (1 basis point equals 0.01%.)
10-year Treasury yield, 6 months
After a stellar 2023, Wall Street strategists see much lower returns for stocks in the new year, according to the CNBC Pro exclusive Market Strategist Survey. The top 14 strategists from major firms expect that the S&P 500 will end 2024 at 4,881, only about 2.3% above Friday’s close of 4,769.83.
Some are warning about a weaker economy and more tepid consumer spending, which could translate into slower earnings growth for Corporate America.
“The biggest actual risk facing equities isn’t the Fed or [European Central Bank] not cutting as much as anticipated but instead that [earnings per share] suffers a larger than expected decline amid an environment of cooler growth and waning price power,” Adam Crisafulli, founder of Vital Knowledge, said in a note.