As 2024 nears its conclusion, the U.S. stock market is struggling, with major indexes slipping in the final days of a banner year. The market had experienced strong growth throughout the year, but concerns about inflation, high valuations, and specific company troubles are weighing heavily on investors.
Tech Giants Drag Down the Market
One of the major contributors to the U.S. stock market decline on Monday was the underperformance of Big Tech companies. Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) both saw their stock prices fall by 1%, reflecting concerns over their high valuations and their disproportionate impact on the broader market. As tech stocks make up a significant portion of the S&P 500, their declines tend to have a ripple effect on the overall market performance.
Boeing Faces Additional Struggles
Boeing (NYSE:BA) also had a difficult day, with its stock plummeting 1.8%. The company’s struggles were exacerbated by a tragic accident involving one of its 737-800 jets in South Korea, resulting in the loss of 179 lives. In response, South Korea has launched an inspection of all Boeing 737-800 aircraft operated within the country. This tragedy adds to Boeing’s ongoing issues, including safety concerns with its aircraft, a machinists strike, and a substantial drop in stock value over the past year. Boeing’s shares have fallen over 30% in 2024, highlighting the mounting challenges it faces.
Mixed Performance in Airline Stocks
Following the crash, airline stocks exhibited mixed reactions. United Airlines (NASDAQ:UAL) fell 1.2%, while Delta Air Lines (NYSE:DAL) dropped 0.5%. However, American Airlines (NASDAQ:AAL) bucked the trend and gained 1.4%. These airlines all have Boeing aircraft in their fleets, and the tragedy has reignited safety concerns for those operating Boeing planes.
Energy Stocks Show Resilience
While most sectors saw declines, energy stocks demonstrated resilience. The price of crude oil rose by 1.2%, which helped support energy companies. The energy sector was the only one to show positive movement within the S&P 500, gaining 0.4% on Monday. Additionally, natural gas prices surged 10%, providing a boost to natural gas producers. EQT Corp. (NYSE:EQT) saw a notable rise of 5.3% in response to the jump in natural gas prices.
Impact of Falling Bond Yields
Bond yields, on the other hand, experienced a drop. The yield on the 10-year Treasury fell to 4.56%, down from 4.63% at the end of the previous week. Similarly, the two-year Treasury yield decreased to 4.26%. These movements suggest a slight reduction in market optimism, with investors shifting their attention to riskier assets, including equities, amid cooling inflation.
U.S. Stock Market Nearing a Strong Year
Despite the recent downturn, 2024 has been a strong year for the U.S. stock market, particularly the S&P 500. The index is still on track for its second consecutive year of growth, with an increase of more than 20%. Economic fundamentals, including a growing economy, solid consumer spending, and a strong job market, have helped propel stocks forward. Analysts predict that S&P 500 companies will report earnings growth of more than 9% for the year, further indicating a robust market performance.
Inflation and Fed Actions Stir Investor Concerns
One of the factors influencing market sentiment is inflation. The Federal Reserve’s cautious stance on interest rate cuts amid concerns about inflation’s potential to reignite has kept investors on edge. The latest report showed inflation edging higher to 2.7% in November, raising questions about whether the Fed will need to adopt a more aggressive approach in 2025. Meanwhile, President-elect Donald Trump’s threats of tariffs have added another layer of uncertainty to the economic outlook.
Looking Ahead to 2025
As the year winds down, there is little economic or corporate news to move the U.S. stock market. Investors will focus on data releases later this week, including U.S. construction spending figures for November and manufacturing updates for December. However, market activity is expected to be subdued due to the New Year holiday, which will close U.S. markets on Wednesday.
The U.S. stock market has had a stellar year in 2024, but the final days are marked by volatility, particularly in tech stocks and Boeing. Looking ahead, investors are watching closely for any signs of inflationary pressures or changes in monetary policy that could impact the market in the coming year.
Featured Image – Freepik
