U.S. stocks are lower Tuesday morning, with Wall Street starting the new trading year on a negative note after a 2023 rally that left the S&P 500 index just shy of a fresh record. The S&P 500 fell 29 points, or 0.6%, to 4,740.The Dow Jones Industrial Average lost 6 points to 37,683.The Nasdaq Composite eased 229 points, or 1.5%, to 14,781. On Friday, the Dow Jones Industrial Average DJIA fell 21 points, or 0.05%, to 37,690, the S&P 500 SPX declined 14 points, or 0.28%, to 4,770, and the Nasdaq Composite COMP dropped 84 points, or 0.56%, to 15,011. U.S. equities are starting the year’s first session in the red. Though the Dow is trimming earlier loses, the Nasdaq Composite is turning lower as morning trading continues. The move follows soft data from China, which raised concerns about the health of the global economy, and rising oil prices amid heightened tensions in the Middle East. An analyst downgrade for Apple Inc., one of the Magnificent Seven, wasn’t helping either. The fall is a bumpy beginning to 2024 after a blockbuster end to 2023, but by the end of last week, the S&P 500 had not revisited its early January 2022 record close of 4796.56, but the index still logged its ninth straight week of gains. New data on America’s economy keeps showing the slowing pattern. Construction spending in November was up 0.4%, lower than the forecasted 0.6% spending rise. Though lower than expectations, the numbers mark the 11th straight month of construction spending increases. Also Tuesday, the S&P manufacturing purchasing managers’ index for December was 47.9 versus the initial 48.2.
It’s just the start on a slate of economic data coming this week. The big numbers come Friday, when the Labor Department releases the December jobs report. The economy could add a forecasted 170,000 jobs, down from 199,000 jobs added in November. Before then, investors have to the gauge another sign of consumer health. A downgrade of Apple stock (AAPL) to underweight from neutral has pressured the Dow component’s stock price. Apple shares were down 3% in early trading following the Barclays analyst call pointing to slackening consumer demand. Traders are also keeping their eye on international data. Hong Kong’s Hang Seng shed 1.5% and the Shanghai Composite dipped 0.4% after an official report over the weekend showed China’s factory activity in December eased to its slowest pace in six months.
“The PMI figures indicate a slowdown in China’s economic recovery in the last months of the year,” said Stephen Innes, managing partner at SPI Asset management. This development is expected to pressure fiscal and monetary policy makers to take urgent action, especially after leaders committed to maintaining a pro-growth stance in 2024,” he added. Sentiment was further hit in the region by a deadly earthquake which hit the western Coast of Japan. The Nikkei 225 fell 0.2%. Adding to investor caution on Tuesday was heightened geopolitical angst as Iran said it would send a warship to the Red Sea after the U.S. Navy sank some of the Tehran-backed Houthi militia’s boats, Reuters reported.
Brent crude (BRN00) rose 2% to trade above $78 a barrel in response, and the move raised concerns that higher energy costs may again build inflationary pressures, This may have contributed to a 8.1-basis-point move higher in 10-year Treasury yields BX:TMUBMUSD10Y to 3.962% on Tuesday. The bond benchmark’s sharp yield fall in recent months, on hopes easing inflation will allow the Federal Reserve to soon start cutting interest rates, helped power the S&P 500 up 24.2% in 2023, to within 0.5% of its previous record close hit two years ago. Traders in derivative markets now expect 150 basis points of benchmark rate cuts in next year, according the CME’s FedWatch tool. However, many analysts remain sanguine about bond markets continuing to support stocks. “The stage is set for further gains, certainly in terms of historical trends, which suggests that the momentum could spill over into January,” said Richard Hunter, head of markets at Interactive Investor.
But “the initial tests of investors’ mettle will come thick and fast during the month,” he added. Apple Inc. shares are more than 3% lower Tuesday after a downgrade from Barclays analyst Tim Long, who said it was “time for a breather.” Long cut his rating to underweight from neutral, pointing to soft spots in consumer demand for certain Apple products. Tesla Inc. shares TSLA are up more than 0.9% in Tuesday trading after fourth-quarter delivery data beat expectations. Tesla delivered 484,507 vehicles in the fourth quarter, while the FactSet consensus was for 473,000 vehicles. Rivian Automotive Inc. shares RIVN are 9% lower following 2023 delivery data from the electric-vehicle maker. Rivian said it delivered 50,122 vehicles in 2023, a 146.5% year-over-year increase, but the FactSet consensus was for 51,000 deliveries. Dow Jones Newswires
