Written by David French
(Reuters) – Wall Street's Christmas holiday cheer came to an abrupt end on Friday, sending all three major indexes down in broad-based declines that also affected tech and growth stocks that had propelled the market higher through much of the shortened trading week. The stock closed lower.
The decline ended the Dow Jones Industrial Average's winning streak after 10 sessions of declines at just five sessions, marking its worst decline since 1974.
According to preliminary data, the S&P 500 index fell 65.34 points, or 1.08%, to end at 5,972.25 points, while the Nasdaq Composite Index fell 294.69 points, or 1.47%, to 19,725.67 points. The Dow Jones Industrial Average fell 321.73 points, or 0.74%, to $42,992.58.
“It feels like there's been a lot of profit-taking across the board today,” said Michael Reynolds, vice president of investment strategy at Glenmede.
“We've been in a fairly robust bull market for more than two years now…so it's not at all surprising to see some people taking profits and rebalancing their portfolios ahead of the new year.”
The drop in stocks disrupted the seasonal Santa Claus rally, which traditionally sees stocks rise during the last five sessions of December and the first two sessions of January. Since 1969, the S&P 500 index has risen an average of 1.3%, according to the Stock Traders Almanac.
Thursday's trading suggested momentum was stalling, with both the S&P 500 and Nasdaq posting modest losses, ending a multi-session winning streak.
Rising U.S. Treasury yields have caught the attention of investors, with the benchmark 10-year Treasury note hitting its highest in more than seven months in the previous session. The yield was hovering around that level at 4.62% on Friday.
Rising yields are expected to hinder the growth of growth stocks by raising the cost of borrowing money for business expansion. Those stocks, especially the so-called Magnificent Seven tech megacap stocks that were a major driver of the market's rally in 2024, were also caught up in Friday's decline.
Tesla led the group in decline for the second day in a row.
“When interest rates go up like this, the cost of capital goes up, and they've gone up pretty significantly over the past month or so,” Glenmede's Reynolds said.
“Investors may just be reassessing their bets when the cost of capital is higher, perhaps looking at some of the Mag7 valuations and finding better value elsewhere. Maybe you're wondering if you can do it.”
Most of the S&P's 11 major sectors fell. The three worst performing indexes on Friday were the three leading 2024 indexes: consumer goods, information technology and communications services.
