Wall Street stocks began the year with a tech-driven hangover, after the rally which ended in 2023 became cautious. Tech stocks had their worst day for more than two month.
The Nasdaq Composite ended the day down by 1.6 percent, its lowest performance since October 26, while blue-chip S&P 500 closed at 0.6 percent — its worst day in nearly a week.
Chipmakers and Apple were the main tech losers that dragged the Nasdaq down and the S&P down. Apple, the consumer technology giant, dropped by 3.6 percent for its worst performance in nearly four months. Barclays analysts had downgraded the company to the equivalent “sell” rating. This was only the second time in the past two years that the company has received this rating.
Tuesday’s declines followed a year in which stocks defied early gloom to roar higher, pushing the S&P up nearly 25 per cent for 2023 — its third- best performance in the past decade — to within sight of a record high.
The market optimism surged again last month, after the Federal Reserve shocked investors by signaling an end to interest rate increases and hinting that future cuts may be coming.
With a rally of 4.4 percent in December, the S&P rose from its lows of October to 15 percent. Participants said that the strength of these gains was what prompted Tuesday’s caution.
Amelie Derambure is the senior portfolio manager for Amundi. She said, “It’s only natural that the market would take a moment to breathe and assess the chances of a soft landing after such a spectacular rally.” We can’t have everything. It’s unlikely we’ll be able to have both a perfect soft-landing and a perfectly disinflationary momentum at the same time.
Not all agree, but some cite the earthquake that occurred in Japan on Monday and Middle East tensions as factors for the oil price increase.
Analysts at Bespoke said that while such factors “haven’t helped regarding this morning’s market picture”, they wouldn’t be able to account for such a big decline. The more likely cause is simply profit-taking following a massive rally that ended 2023.
Investors will also be expecting new US data, such as the minutes of the Fed’s crucial December meeting due on Wednesday and the monthly employment figures due on Friday.
On Tuesday, none of the seven giant tech companies that boosted markets last year to new heights, including Microsoft and Amazon, advanced. Microsoft, Meta and Amazon were all in the negative zone along with Nvidia, Tesla, Alphabet and Tesla. Tesla, which reported better-than-expected quarterly deliveries and ended flat with a 0.04 percent decline, was the least impacted.
Advanced Micro Devices was the biggest Nasdaq faller, dropping 6.5 percent, while other chip-related stocks were also affected. Intel fell 5.5 percent, while ASML fell 5.6 percent.
Bloomberg reported on Monday about the sector’s possible problems in selling to China. US authorities had reportedly put pressure on ASML, forcing them to stop exports weeks before US bans would take effect.