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Traders work on the floor of the New York Stock Exchange (NYSE) on the first trading day of 2024 on January 02, 2024 in New York City.
Spencer Platt | Getty Images
The S&P 500 fell Tuesday, the first trading day of the year, as bond yields inched higher and investors took some money off the table following a surprisingly strong 2023.
The broad market index lost 0.57% to settle at 4,742.83. The Nasdaq Composite pulled back by 1.63% to 14,765.94, for its worst day since October. The Dow Jones Industrial Average added 25.50 points, or 0.07%, to close at 37,715.04. Markets were closed Monday for New Year’s Day.
Apple shares slid more than 3% after Barclays downgraded the member of the Magnificent Seven market leaders basket to an underweight rating. On the other hand, the Dow remained in positive territory as defensive stocks like Johnson & Johnson and Merck strengthened.
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.
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 roughly 8 basis points, approaching 4% again. (1 basis point equals 0.01%.)
10-year Treasury yield, 6 months
That trend was reversing on Tuesday as the new year of trading began with megacap tech names declining. Apple shares fell 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.
This reversal is fairly common in the first day of trading, according to Infrastructure Capital Management CEO Jay Hatfield.
“This is perfectly normal, somewhat expected activity,” he told CNBC. “It’s a normal seasonal pattern that you have tax loss selling in the period before year-end, and then you have gain harvesting in the period after … And I would say the trigger point too was this Apple downgrade.”
Despite this slight pullback, Hatfield is still bullish on equities in the new year. He expects stocks to pick back up once earnings season rolls back around.
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