[New York Stock Market] Mixed Close in First Trading Day of the New Year... Nasdaq Down 1.63% Due to Sharp Drop in Apple

The major indices of the U.S. New York stock market closed mixed on January 2, 2024, the first trading day of the year (local time). Amid a rebound in Treasury yields, the stock price of Apple, the largest by market capitalization, fell more than 3%, highlighting the decline in tech stocks. The Nasdaq index, which is tech-heavy, recorded its worst day since October last year.

On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average rose 0.07% (25.50 points) to close at 37,715.04. In contrast, the large-cap-focused S&P 500 index fell 0.57% (27.00 points) to 4,742.83, and the Nasdaq index dropped 1.63% (245.41 points) to 14,765.94.

Within the S&P 500, technology, communication, and industrial stocks saw significant declines. Meanwhile, energy, health, utilities, and consumer staples stocks rose more than 1%. Apple fell over 3% after Barclays downgraded its investment rating, citing weak iPhone sales forecasts for this year. Nvidia, which greatly benefited from artificial intelligence (AI) last year, also dropped nearly 3%. Microsoft (-1.37%), Google Alphabet (-1.09%), and Amazon (-1.32%) all declined together. Tesla remained nearly flat as its Q4 deliveries (484,507 units) exceeded expectations. On the other hand, Moderna surged more than 13% after Oppenheimer upgraded its investment rating.

[Image source=UPI Yonhap News]

Investors closely watched the direction of large tech stocks including Apple and movements in Treasury yields on the first trading day of the new year. Analysts widely interpret Apple’s stock decline as a negative catalyst for tech stocks overall, increasing early-year profit-taking pressure on big tech stocks that surged last year.

Jay Hartfield, CEO of Infrastructure Capital Management, told CNBC that the sharp drop in the Nasdaq index, which had rallied double digits last year, on the first trading day of the new year was "normal and somewhat expected." He explained it as a typical profit-taking pattern triggered by the downgrade of Apple’s investment rating. He also expressed optimism that despite the decline, stock prices could rebound during the earnings season.

The rebound in Treasury yields also had a negative impact on the stock market that day. In the New York bond market, the benchmark 10-year U.S. Treasury yield rose to around 3.94%. The 2-year yield, sensitive to monetary policy, hovered near 4.32%. The dollar index, which measures the value of the U.S. dollar against six major currencies, rose nearly 0.9% to about 102.2.

Currently, expectations for an interest rate cut as early as March persist in the market. This pivot outlook was also a factor supporting the New York stock market rally at the end of last year. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the probability that the Federal Reserve (Fed) will cut rates by at least 0.25 percentage points in March is close to 80%. The outlook for a rate hold stands at about 21%.

However, compared to the previous session, the rate cut outlook has retreated slightly while the hold outlook has strengthened somewhat. This is interpreted as reflecting some caution that market optimism based on rate cut expectations may be excessive. If the Fed’s rate cuts do not occur as quickly as the market expects, it could immediately worsen investor sentiment.

This week, a slew of employment-related economic indicators will be released, including the U.S. Labor Department’s nonfarm payroll report, ADP private employment report, and Job Openings and Labor Turnover Survey (JOLTs). The minutes of the December FOMC meeting, which were seen as dovish (favoring monetary easing), will also be published. Manufacturing and non-manufacturing Purchasing Managers’ Indexes (PMI) are also scheduled for release. Investors are expected to use these data to gauge the pace of the Fed’s rate cuts.

The manufacturing indicator released on this day showed weakness below the baseline of 50. The S&P Global Manufacturing PMI for December was 47.9, down from the previous month. This also missed the earlier preliminary estimate of 48.2.

While expectations for a soft landing persist, some on Wall Street have raised concerns about growth this year. They observe that the cumulative effects of tightening could lead to a visible slowdown in consumer spending and worsen corporate growth. Adam Crisafulli of Vital Knowledge said, "The biggest risk facing the stock market is not that the Fed will cut rates less than expected, but that earnings per share will decline more than expected in an environment of slowing growth and weakening pricing power." Barry Bannister, chief equity strategist at Stifel, appeared on CNBC and predicted that the S&P 500 index could fall to around 4,650 in the first half of the year.

Oil prices fell on the first trading day of the year due to tensions in the Red Sea. At the New York Mercantile Exchange, the price of West Texas Intermediate (WTI) crude oil for February delivery closed at $70.38 per barrel, down $1.27 (1.77%) from the previous day.