Wall Street’s major indices opened sharply lower on Monday, with stocks hitting their lowest levels in over a week as subdued trading volumes and elevated Treasury yields overshadowed the usual year-end rally.
Declines Across the Board
By 09:57am ET, the Dow Jones Industrial Average fell 651.52 points, or 1.52%, to 42,340.69. The S&P 500 dropped 89.52 points, or 1.51%, to 5,881.32, while the Nasdaq Composite slid 326.47 points, or 1.66%, to 19,397.26.
All 11 sectors of the S&P 500 were in the red, led by significant losses in consumer discretionary stocks. Notable declines included Tesla, which fell 3.1%, and Meta, down 2.2%. Broadcom’s 3.8% drop contributed to a more than 2% decline in the semiconductor index.
This performance stood in stark contrast to the historical trend of the “Santa Claus rally,” during which equities typically gain in the final five trading days of December and the first two of January. Since 1969, the S&P 500 has averaged a 1.3% increase during this period, according to the Stock Trader’s Almanac.
High Yields Challenge Equity Valuations
Despite marginal gains last week, Wall Street’s optimism has been tempered by the persistent rise in Treasury yields. The benchmark 10-year note yield dipped slightly to 4.548% on Monday but remains near its highest level since May 2024.
David Morrison, senior market analyst at Trade Nation, noted, “If yields continue to hold at these levels… this will be a strong headwind for equity prices, as investors choose the relative safety of a near-guaranteed 5% return on funds in US Treasuries, compared with the uncertainty of stocks, many of which are trading at or near all-time highs.”
Rising yields, coupled with cautious messaging from the Federal Reserve, have dampened rate-cut expectations for 2025. Markets now predict the first rate reduction in May, according to CME Group’s FedWatch Tool.
Sector-Specific Struggles
Among individual stocks, Boeing dropped 3.5%, marking the steepest loss on the S&P 500. The decline came as South Korea ordered emergency safety inspections following the nation’s worst aviation disaster over the weekend, involving a Boeing aircraft.
Crypto stocks also took a hit, with MicroStrategy, Coinbase, and MARA Holdings falling 5.3%, 4.9%, and 5%, respectively, in response to a 2.4% drop in bitcoin prices.
Subdued Trading Expected
With the New Year holiday approaching, trading volumes are expected to remain thin, potentially extending the market’s subdued performance until early January.
Declining issues outnumbered advancing ones by a ratio of 4.12-to-1 on the NYSE and 3.94-to-1 on the Nasdaq. The S&P 500 reported 11 new 52-week lows and no new highs, while the Nasdaq recorded 66 new lows and 24 new highs.
As the year draws to a close, investors are bracing for continued volatility, with key data releases, including the ISM manufacturing survey and weekly jobless claims, due later this week.
