(Bloomberg) — An early stock rally collapsed and major U.S. benchmarks appeared poised to continue a selloff that has wiped more than a trillion dollars off stock prices over the past four sessions. Tesla Inc.’s Post-Christmas Slump rose to almost 20% after annual car sales fell.
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Treasury yields rose, pushing 10-year yields about 20 basis points above levels before Jerome Powell’s hawkish turn at a December 18 Federal Reserve meeting. Big moves have been made across asset classes after Powell’s administration expressed waning enthusiasm for rate cuts. The Cboe Volatility Index rose for the fourth time in five days.
Among individual stocks, Tesla was the worst performer, down 6.9% after the electronic car maker’s fourth-quarter deliveries fell short of expectations and annual revenue fell for the first time in more than a decade.
This year will be a show-me year for corporate profits, according to Lisa Shalett of Morgan Stanley Wealth Management. As for the grim end to 2024, it’s “too early to call it a bad omen,” she told Bloomberg Television.
Treasurys erased an early advance after weekly jobless claims fell to the lowest level in eight months. A Bloomberg gauge of the dollar’s strength traded at a more than two-year high.
Goldman Sachs economists led by Jan Hatzius noted that “issues with seasonal adjustments could cause unemployment benefits figures to be particularly volatile around the holidays.”
U.S. stocks struggled to snap a losing streak that took some shine off the S&P 500’s best two-year run dating back to the late 1990s. The index is up more than 50% since the start of 2023, driven by gains in the tech megacaps and enthusiasm about the profit boost from artificial intelligence.
“At the beginning of the year, analysts are usually quite optimistic; you have quite robust annualized earnings expectations,” Daniel Morris, chief market strategist at BNP Paribas Asset Management, told Bloomberg Television. “For example, even if we don’t quite get 20% earnings growth for the Nasdaq as analysts might suggest, the markets are likely to do well if it’s only 15%.”
Meanwhile, an attack on partygoers celebrating New Year’s in New Orleans put US homeland security in the spotlight again, less than a month before Donald Trump is sworn in as president. The Federal Bureau of Investigation is investigating this incident, as well as the deadly Tesla Cybertruck explosion outside Trump’s Las Vegas hotel.
A shooting at a New York City nightclub added to concerns, with authorities saying it was not related to terrorism.
A measure of stock sentiment on Wall Street, the VIX, briefly jumped above 18. Readings above 20 indicate growing concerns about near-term volatility.
In the coming months, growth prospects in Europe and China, the Federal Reserve’s policy trajectory and Trump’s agenda will be among the most pressing topics on traders’ radar.
European energy stocks outperformed after a sharp rise in natural gas prices as the region braced for frigid winter temperatures without Russian supplies through Ukraine. A transit contract between the two warring countries expired on New Year’s Day, with no alternative available.
The euro fell to its weakest against the dollar in more than two years, reflecting concerns about European growth, US trade tariffs and monetary policy divergences with the US. Many strategists predict a decline to parity with the dollar or even lower this year.
In Asia, sentiment was subdued, with Chinese shares the worst performers as data pointed to a slowing economy and investors looked ahead to potentially higher rates. The price of MSCI Inc. for Asian shares fell for the third day of the past four. The financial markets in Japan remained closed.
Elsewhere in the commodities sector, oil rose after an industry report showed US crude inventories continued to shrink. A report from the American Petroleum Institute shows that inventories fell by 1.4 million barrels last week, which would be a sixth straight decline. Golden rose. Bitcoin extended its rally to a third day.
Main events this week:
Some of the major moves in the markets:
Stocks
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The S&P 500 was down 0.5% as of 12:58 p.m. New York time
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The Nasdaq 100 fell 0.6%
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The Dow Jones Industrial Average fell 0.5%
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The MSCI World Index fell 0.4%
Currencies
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The Bloomberg Dollar Spot Index rose 0.3%
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The euro fell 0.9% to $1.0263
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The British pound fell 1.2% to $1.2371
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The Japanese yen fell 0.2% to 157.56 per dollar
Cryptocurrencies
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Bitcoin rose 1.9% to $96,562.61
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Ether rose 2.5% to $3,444.75
Bonds
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The yield on ten-year government bonds rose by one basis point to 4.58%
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The German ten-year yield rose by one basis point to 2.38%
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The British ten-year yield rose by three basis points to 4.59%
Raw materials
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West Texas Intermediate crude rose 2.3% to $73.36 a barrel
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Spot gold rose 1.2% to $2,656.11 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Richard Henderson, Chiranjivi Chakraborty, Cecile Gutscher and John Viljoen.
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