Dow ekes out new record close, Nasdaq ends lower to start 2024

What drove markets

U.S. equities ended the year’s first session mostly in the red, a bumpy beginning to the year after a blockbuster end to 2023. At 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.

Tuesday’s move lower follows soft data from China, which raised concerns about the health of the global economy, and rising oil prices on heightened tensions in the Middle East. An analyst downgrade for Apple Inc., one of the Magnificent Seven group of stocks, wasn’t helping, either.

There are news headlines to consider, but also a mood check, especially after 2023 went out with a big bang, said Steve Sosnick, chief strategist at Interactive Brokers.

“The rally became so powerful that no manager could afford to be on the  sidelines,” Sosnick said, calling it “weaponized FOMO” and an “everything” rally.

“After a big rally, it’s not unusual, and I would argue not unhealthy, to see the market correct a little, to see some profit taking,” he said in a phone interview.

Also read: Stock market’s 9-week rally leaves S&P 500 clearly ‘overbought’ — here’s the ‘good’ news

So it’s back to business, and back to attention on the headwinds for investors, Sosnick said. “The mentality today is less about finishing the year on a positive note and more about the normal ebb and flow for markets, with a little bit bias toward risk-off.”

New data Tuesday morning added to the view of a slowing U.S. economy. Construction spending in November was up 0.4%, lower than the forecasted 0.6% spending rise. Though lower than expectations, the numbers still mark the 11th straight month of construction-spending increases.

However, another report on Tuesday showed the S&P manufacturing purchasing managers index for December was 47.9 versus an initial 48.2.

It’s just the start of a slate of economic data coming this week. The big numbers come Friday, when the Labor Department releases the December jobs report, with 170,000 jobs forecast, down from 199,000 jobs added in November.

Investors have already been given another gauge of consumer health. Apple
AAPL,
-3.58%
shares were under pressure following a downgrade from underweight from neutral by Barclays, which pointed to slackening consumer demand for some iPhones.

Sentiment was further hit by a deadly earthquake along the western coast of Japan. 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,
+0.76%
fell 1.5% to end at around $75.89 a barrel. One concern has been that higher energy costs may again build inflationary pressures.

A flight to safety may have contributed to 10-year Treasury yields
BX:TMUBMUSD10Y
moving about 8.4 basis points higher to 3.944% on Tuesday, while 30-year Treasury yields also gained ground.

However, some analysts see 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 said.

Companies in focus

• Apple Inc. shares
  AAPL,
  -3.58%
  ended 3.6% 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.

• JPMorgan Chase & Co.’s stock
  JPM,
  +1.16%
  ended up about 1.2% on Tuesday to around $172.13, a record close.

• Tesla Inc. shares
  TSLA,
  -0.02%
  fell less than 0.1% in Tuesday trading even though the company’s 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,
  -10.06%
  finished 10.1% 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. 

• Moderna Inc. shares
  MRNA,
  +13.12%
  closed 13.1% higher Tuesday following a stock upgrade to buy. Oppenheimer analysts notched the stock to outperform from perform, pointing at some noteworthy products in the pharmaceutical company’s pipeline that are expected to gain regulatory approval.

Jamie Chisholm contributed.