Stocks fell in the first two trading days of 2024, as investors took profits after 2023’s strong rally and recalibrated their portfolios for the new year. It was the worst start to a year for the S&P 500 (SPX) index since 2015, and a stark contrast with the exuberant trading of the final weeks of last year.
Rate-sensitive technology stocks led the declines, pulled down by the previous year’s biggest winners, tech mega caps. The “Magnificent Seven” stocks, which provided the lion’s share of the market’s gains in 2023, closed their fourth-straight losing day on Wednesday. The tech rout, which wiped out $383 billion in stock value in four days, was led by Apple (AAPL), which lost 4.5% after a downgrade by Barclays analysts, who expect lower demand for iPhones going forward. But even without this catalyst, it would only be natural to see some pull-back in tech giants after an over 100% rally last year.
Investors returned from the holidays with fresh doubts over the stock rally’s sticking power, with the Minutes from the Federal Reserve’s December policy meeting adding to worries. The Minutes showed that while the policymakers agreed last month that the interest rates are not expected to be raised further, they provided no signal that would hint at a cut as early as March, contrary to the wide-held expectations.
Moreover, while almost all members of the Federal Open Market Committee (FOMC) had expected some easing in 2024, their expectations differed widely. Some policymakers projected three or more interest-rate cuts this year, while others penciled in two or fewer, with even the most dovish expectations falling short of the futures market’s anticipation of six cuts this year.
In their outlook provided within the Minutes, the committee members appeared increasingly convinced that inflation is coming under control, while their worries shift to the extent of harm caused to the economy if the policy rates prove to be “overly restrictive.” However, the absence of hints on the projected timetable of cuts disappointed investors.
