By Alden Bentley, Naomi Rovnick and Ankur Banerjee
NEW YORK/LONDON/SINGAPORE (Reuters) – U.S. stocks wrapped up Christmas week on Friday with retracements of double-digit uptrends, and, alongside the dollar to a smaller degree, succumbed to profit taking in illiquid markets heading into the last weekend of 2024.
Even with its slight loss on Friday, the U.S. dollar was headed for an almost 7% annual gain, as traders anticipated robust U.S. growth, as well as tax cuts, tariffs and deregulation by the incoming administration of President-elect Donald Trump, would make the Federal Reserve cautious on rate-cutting well into 2025.
Selling in Wall Street’s main indexes gathered steam through the morning, chilling the mood after the week started out showing the hallmarks of a classic year-end rally to crown what was already a stellar year.
“The Santa Claus rally came a bit earlier this year, and I think this is profit taking ahead of another holiday-shortened week next week,” said Jeff Schulze, head Of economic and market strategy at Clearbridge Investments. “That’s another reason I think this isn’t causing more apprehension heading into a weekend. It’s not uncommon for the market to hit air pockets when the volumes are light.”
Leading the decline were high-flying “Magnificent 7” stocks like Tesla which slid 4.9%, along with Amazon.com, Microsoft and Nvidia.
The S&P 500 fell 1.11%, leaving Wall Street’s benchmark with a 0.67% weekly gain. The Nasdaq Composite ended down 1.49%, having been down more than 2% during the session. The Dow Jones Industrial Average fell 0.77%.
For 2024, the Dow is up 14%, the S&P 500 is up 25% and the tech-heavy Nasdaq is up 31%.
“I’ve heard anecdotes that pension funds are rebalancing ahead of year-end, selling stocks and buying bonds,” said Steve Sosnick, chief market strategist at Interactive Brokers, who added he could not verify.
“It would explain the sudden sell-off on no news. And of course, if large funds are selling stocks en masse, the megacap tech stocks would bear the brunt because of their heavy weighting in major indices.”
MSCI’s broad global share index fell 0.59% on Friday, and was 1.45% higher for the week.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1%, marking a 1.5% weekly rise, while Tokyo’s Nikkei rose 1.8%.
Europe’s Stoxx 600 rose 0.67% on Friday and was about 1% higher for the week.
“There is some potential upside left for this bull market, but it is limited,” said Luca Paolini, chief strategist at Pictet Asset Management
