Traders on the floor of the New York Stock Exchange, Aug. 4, 2022.
Source: NYSE
Stock futures were lower Tuesday, the first trading day of the year, as interest rates rebounded slightly and investors took some money off the table following a surprisingly strong 2023 that saw the S&P 500 rally 24%.
Apple shares led the pullback after Barclays downgraded the member of the Magnificent 7 market leaders basket to an underweight rating.
Futures on the Dow Jones Industrial Average were down 185 points, or 0.5%. S&P 500 futures shed 0.7% after the benchmark closed Friday just 0.6% from its 2022 record close. Nasdaq 100 futures lost 0.9%. Markets were closed Monday for New Year’s Day.
The stock market finished 2023 with a bang, as the S&P 500 climbed for nine weeks in a row to end the year, notching its best weekly win streak since 2004. Risk assets enjoyed a big relief rally as the economy remained resilient and inflation cooled, while the Federal Reserve signaled an end to rate hikes and forecasted rate cuts later this year. The market also endured a regional banking crisis as well as wars in Ukraine and the Middle East.
Technology shares, especially megacap stocks, led the 2023 advance with Apple soaring 48%, Microsoft surging nearly 57% and Nvidia skyrocketing 239%. The tech-heavy Nasdaq Composite ended the year up 43.4% for its best year since 2020.
That trend was reversing on Tuesday as the new year of trading began with those same stocks declining in early trading. Apple shares were down nearly 2% in premarket trading after the negative call from Barclays. The firm said Apple could lose about 17% this year because of lackluster iPhone sales. Microsoft and Nvidia shares were also in the red in early trading.
The blue-chip Dow Jones Industrial Average logged a 13.7% gain and notched a new record during 2023. Part of that rally was helped by a turn in interest rates. The 10-year Treasury yield had spooked investors by topping 5% at one point in October, before it topped out and closed the year out lower than 3.9%. On Tuesday, the 10-year yield was back up 7 basis points, approaching 4% again. (1 basis point equals 0.01%.)
10-year Treasury yield, 6 months
After a stellar 2023, Wall Street strategists see much lower returns for stocks in the new year, according to the CNBC PRO exclusive Market Strategist Survey. The top 14 strategists from major firms expect that the S&P 500 will end 2024 at 4,881, only about 2.3% above Friday’s close of 4,769.83.
Some are warning about a weaker economy and more tepid consumer spending, which could translate into slower earnings growth for Corporate America.
“The biggest actual risk facing equities isn’t the Fed or [European Central Bank] not cutting as much as anticipated but instead that [earnings per share] suffers a larger than expected decline amid an environment of cooler growth and waning price power,” Adam Crisafulli, founder of Vital Knowledge, said in a note.
Bitcoin breaks above $45,000
Bitcoin traded above $45,000 for the first time since April 2022 to start the year, adding to the digital currency’s sharp gains over the past 12 months. Bitcoin was last at $45,605, up 4.3% on the day, according to Coin Metrics. Over the past year, its up more than 170%.
BTC in past year
— Fred Imbert
Europe stocks open higher
European stock markets opened higher Tuesday.
The benchmark Stoxx 600 index was up 0.43% at 8:05 a.m. London time, while most sectors moved higher. Oil and gas led gains, up 1.3%, as technology stocks slipped 0.2%.
Germany’s DAX and France’s CAC 40 both charged around 0.5% higher, while the U.K.’s FTSE 100 was up 0.25%.
Stoxx 600 index.
— Jenni Reid
Dutch government partially revokes ASML’s chip equipment export license to China
The Dutch government has partially revoked semiconductor equipment maker ASML‘s export license to China for two of its systems used in manufacturing advanced chips.
“A license for the shipment of NXT:2050i and NXT:2100i lithography systems in 2023 has recently been partially revoked by the Dutch government, impacting a small number of customers in China,” said ASML in a statement.
NXT:2050i and NXT:2100i are deep ultraviolet lithography machines used in the volume production of the most advanced logic and memory chips.
The company said it does not expect the move to have a material impact on its financial outlook for 2023.
ASML has been restricted by the Dutch government from exporting its extreme ultraviolet lithography machines to China, in a bid to contain China’s chip making tech. ASML has not shipped the equipment to China so far.
— Sheila Chiang
Caixin China December manufacturing PMI comes in at 50.8
A private survey showed manufacturing activity in China expanded in December, at odds with a similar survey conducted by the country’s statistics bureau that reported a contraction.
The Caixin manufacturing purchasing managers’ index came in at 50.8 in December, according to a release Tuesday, following a 50.7 reading for November. China’s official PMI fell to 49.0 in December from 49.4 the previous month, the country’s National Bureau of Statistics said in a Sunday release.
A PMI reading above 50 indicates expansion in activity, while a reading below that level points to a contraction.
— Clement Tan
Singapore GDP expands 2.8% in final quarter of 2023
Singapore’s economy grew 2.8% year-on-year in the final quarter of 2023, according to advance estimates from the country’s Ministry of Trade and Industry.
This was a sharp increase from the 1% expansion recorded in the third quarter, and the fastest rate of growth since the third quarter of 2022.
On a quarter-on-quarter seasonally-adjusted basis, the economy expanded by 1.7%, a larger expansion than the 1.3% in the third quarter.
Read the full story here.
— Lim Hui Jie
Australia’s factory activity contracts at fastest pace since May 2020: Judo Bank
Australia’s factory activity in December saw its sharpest contraction since May 2020, according to private surveys from Judo Bank.
The country’s manufacturing purchasing managers’ index slid to 47.6 in December, down from 47.7 in November and marking its 10th straight month of contraction.
In its release, the bank wrote that this was mainly due to a further deterioration in demand from the country’s manufacturing sector, with incoming new orders for Australian manufactured goods falling for a 13th straight month.
This was because of soft economic conditions and pressure from high interest rates, with the bank adding that foreign demand was also subdued.
— Lim Hui Jie
Record watch
Investors are on record watch as the S&P 500, with its Friday close of 4,769.83, is now less than 1% away from a new high.
A close above 4796.56, the record the equity benchmark reached in January 2022, would constitute a new all-time high. The S&P 500’s current intraday record is 4818.62 also from January 2022.
S&P 500
— Yun Li
More stock gains in 2024, but much lower return, history says
A banner year with the S&P 500 gaining more than 20% could suggest more good news in the following year if history is any guide, but don’t expect a bigger year than 2023, according to Ryan Detrick, Carson Group’s chief market strategist.
Dating back to 1950, there have been 21 times that the S&P 500 logged a yearly gain at least 20%. What happens the next year is that the equity benchmark has been in the green 80 of the time with an average return of 10%, the strategist said.
Only once in history — in 1997 — did stocks gain more the next year, Detrick said.
— Yun Li
