After early gains — with the Dow rising by more than 300 points — the indices reversed course as midday approached. The Dow’s intraday swing from high to low reached over 700 points, underscoring the market’s volatility. Technology stocks contributed to the declines, with Apple falling 2.6% and Tesla dropping 6% after reporting a decline in 2024 deliveries. Nvidia, however, rose 3%, helping to offset some of the losses from other major tech companies.
The market’s weakness on January 2 dashed hopes for a “Santa Claus rally,” a phenomenon that typically sees rising stocks during the final week of December and the first two trading days of January. Historically, the S&P 500 has risen by an average of 1.3% during this period, finishing higher nearly 80% of the time, according to Dow Jones data.
Bond yields also fluctuated, with the 10-year Treasury yield peaking at nearly 4.6% before retreating. This added another layer of uncertainty, as higher interest rates make bonds an attractive alternative to stocks. “If we don’t want to buy at all-time highs, you can now still earn good money in cash. Let it sit there, wait for a better entry point, and wait for it in certain stocks,” Liz Young Thomas, head of investment strategy at SoFi, told CNBC.
The week has been light on economic data, though a jobless claims report revealed a drop in both initial and continuing claims. Despite the overall market declines, some sectors, such as energy, showed positive movement, with energy stocks climbing 0.9%. Consumer discretionary, however, was the worst-performing sector, down more than 1.3%.
HSBC analysts caution that January could continue to be a choppy month for all asset classes, as the Federal Reserve’s December hawkish stance on interest rates persists. Max Kettner, HSBC’s chief multi-asset strategist, noted that the “Danger Zone” created by rising yields could lead to further market turbulence, though he remains optimistic about US tech stocks in the event of a market dip.