JANUARY 2, 2024
Tumbling technology stocks cast a pall over a trading day in which the Dow Jones Industrial Average ended at a new all-time high, showing how much sway a few giant technology firms have over the broader market.
The tech-heavy Nasdaq Composite Index declined 1.6%, dragged down by the same big names, including Apple and Nvidia, that propelled it 43% higher last year.
A good day for energy, healthcare, utilities and consumer-staples stocks couldn’t offset the pull from technology and telecom shares in the S&P 500, which shed 0.6%.
The Dow Jones Industrial Average, which has risen for nine consecutive weeks, eked out a 0.07% gain, or 25.5 points, to close at a new record of 37715.04.
Rising bond yields contributed to the selloff in tech stocks. The yield on the benchmark 10-year U.S. Treasury note ended Tuesday at 3.944%, up from 3.860% on Friday. Yields rise as prices fall.
There is growing doubt that the big tech stocks that powered last year’s rally can keep rising. The so-called Magnificent Seven stocks swelled last year to represent about 30% of the S&P 500’s market value and were responsible for much of the index’s 24% gain.
Minus Apple, Amazon.com, Google parent Alphabet, Microsoft, Nvidia, Facebook owner Meta Platforms and Tesla, the S&P 500 rose 13% last year.
Jason Pride, chief of investment strategy and research at money manager Glenmede, said his firm has skewed its investments slightly toward fixed income and trimmed its exposure to equities, particularly the big seven stocks.
“Many of them are fantastic businesses, but there’s a point in time when any business can be overvalued,” Pride said. “I think about this as playing the field rather than betting on the leaders.”
Apple, which climbed to an all-time high in December, shed 3.6% Tuesday after analysts at Barclays downgraded its shares to a bearish “underweight” rating and trimmed their price target for the stock.
“We are still picking up weakness on iPhone volumes and mix, as well as a lack of bounceback in Macs, iPads and wearables,” they wrote in a note to clients.
Amazon.com, Alphabet and Microsoft each lost more than 1%. Chip maker Nvidia and Meta dropped more than 2%.
Tesla lost less than 0.1% after the electric-car maker said it delivered 1.81 million vehicles last year. Tesla met its own 2023 production target and topped Wall Street’s estimate yet fell behind China’s BYD as the world’s largest seller of electric vehicles.
Moderna was the S&P 500’s top performer Tuesday. The drugmaker’s shares popped 13% after Oppenheimer analysts upgraded the stock and Moderna Chief Executive Stéphane Bancel wrote in a letter to shareholders that it expects sales growth in 2025.
A big question among investors heading into 2024 is whether the U.S. consumer will continue to buoy markets by spending. Last year, companies in the S&P 500 that depend on discretionary consumer spending were among the index’s top performers.
“We’ve had a strong consumer, but we do have some reasons to be cautious, particularly lower-income consumers,” said Amber Fairbanks, portfolio manager at Impax Asset Management. “We’re already beginning to see some cracks.”
Cruise stocks led the S&P 500 lower Tuesday, sinking even more than technology shares. Norwegian Cruise Line Holdings, Royal Caribbean Group and Carnival lost 8.6%, 7.2% and 6.7%, respectively, a sign of skepticism that consumers will keep spending like they have since the Covid lockdowns ended.
Oil prices settled lower after rising in early trading when Iranian state media reported that Tehran sent a warship to the Red Sea. Shipping giant Maersk said it would pause all transit through the Red Sea and the Gulf of Aden. Despite the risk of trade disruptions, benchmark U.S. crude futures lost $1.27 a barrel, or 1.8%, to end at $70.38.
Overseas markets were mixed Tuesday. London’s FTSE 100 Index lost 0.2% and Germany’s DAX added 0.1%.
The Shanghai Composite Index declined 0.4% after Chinese data showed that manufacturing activity slowed in December. Hong Kong’s Hang Seng dropped 1.5%. The Korea Composite Stock Price Index rose 0.5% to a new 52-week high. Japan’s yen weakened after a deadly earthquake. Its stock market was closed for a public holiday.
Courtesy: Wall Street Journal (WSJ)
