Tech Stocks Slouch Toward Four-Day Drop, Bonds Up: Markets Wrap – Yahoo Finance

January 3, 2024

(Bloomberg) — U.S. stocks extended their slump at the start of the year, while bonds rose on the heels of the last Federal Reserve meeting.

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The Nasdaq 100 fell 1.1%, extending its losing streak to four days (its longest in more than two months) as investors continue to retreat from last year's winning tech sector. The S&P 500 index fell 0.8%, and the small-cap Russell 2000 index suffered its worst decline since the March banking crisis. Tesla and semiconductor stocks fell, and crypto stocks also slumped as Bitcoin erased most of its gains this year.

The dollar rose against most of the Group of Ten (G10) countries for a fourth day in a row, its longest rally since November.

Fed policymakers said last month that interest rate limits could remain in place for longer than expected, but that a rate cut could happen before the end of the year. Swap traders are holding back on bets on a rate cut, with the central bank pricing in a quarter-point cut in the benchmark rate by the March meeting.

U.S. Treasury yields ended the day near their lowest for the day, with the 10-year yield reversing after rising earlier in the day to just over 4%, its highest level since mid-December. did.

“Overall, it was a hawkish update from the Fed,” said Ian Lingen of BMO Capital Markets, but added, “The tone clearly reached an uninterested ear.” .

“While the FOMC minutes focused on more balanced risks to growth and inflation, policy is likely to remain limited for some time,” said Ellen Zentner of Morgan Stanley. “I don't think the Fed is planning to cut rates in the near future,” he said.

Federal Reserve Chairman Jerome Powell suggested last month that policymakers had discussed cutting interest rates, sparking a market rebound. His colleagues at the U.S. central bank then spent the next few days trying to dampen market enthusiasm for faster and deeper rate cuts.

Richmond Fed President Thomas Barkin declined to give an outlook on when the U.S. central bank will first cut interest rates. “The situation is constantly evolving,” he said in prepared remarks Wednesday. “So is our approach. So buckle up. Even if a soft landing is expected, that's the proper safety procedure.”

Read more: Fed's Barkin says soft landing is likely, not inevitable

The Institute for Supply Management's manufacturing index reached 47.4 last month, according to data released Wednesday. The index has remained below the 50 level, which indicates contraction, since the end of 2022. Separate data showed the number of job openings in November fell slightly from the previous month's revised figures.

“Overall, the labor market remains strong, but demand has cooled and is becoming better balanced with supply,” said Rubera Farooqi, chief U.S. economist at High Frequency Economics. “These data are welcome news for policymakers and support the Fed's view that the next rate cut will likely occur in the second quarter.”

ING's James Knightley said Friday's jobs report could solidify the downturn. He said the composition of job growth is “almost as important as the number of employees themselves in determining the outlook for rate cuts in 2024.”

Elsewhere, Bitcoin's selloff on Wednesday wiped out nearly all of the cryptocurrency's gains so far this year. Stocks related to the sector fell, with MicroStrategy Inc. down about 8% and Coinbase Global Inc. down about 3%.

Louis Navellier of Navellier & Associates said: “The year has certainly had a tough start, and after last year's strong gains, there may be an incentive for further profit-taking, but the fundamentals have changed. “There are no changes to our earnings forecast,” he said. “Blue-chip stocks with attractive valuations have a chance of being pulled down for no good reason.”

In corporate news, Walt Disney Co. CEO Bob Iger was rallying support from investors as he sought to fend off pressure from billionaire activist Nelson Peltz. Barrick Gold has approached some of First Quantum Minerals' major investors to gauge their support for a potential acquisition.

Cigna Group's stock price slumped after the Wall Street Journal reported that it was close to a deal to sell its Medicare business for $3 billion to $4 billion.

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