The S&P 500 and Nasdaq Composite closed lower on Thursday, extending their losing streak that kicked off 2024, although the S&P/TSX Composite Index and Dow Jones Industrial Index both eked out a win on the back of financial stocks.
For the S&P 500, this is the worst start to a year since 2015, as tech-focused investors continued to take profits after a blistering rally in the final weeks of last year.
Bets that the Federal Reserve could start reducing rates this year had driven much of the gains toward the end of 2023, though the latest minutes from the central bank’s December policy meeting did not offer many clues on when the easing might commence.
A tick-up in yields on longer-dated U.S. Treasuries - the benchmark 10-year note ended at 4% - prompted traders to move away from growth stocks toward other sectors.
Among the latest economic data, the ADP National Employment report showed U.S. private employers hired more workers than expected in December, pointing to persistent labour market strength that should continue to sustain the economy. This came ahead of official U.S. employment data due on Friday.
Meanwhile, the weekly Labor Department report showed more Americans filed for state unemployment claims than expected.
Canada also releases December jobs figures Friday.
The S&P/TSX Composite Index ended up 52.77 points, or 0.3%, at 20,871.35, posting its first higher close since the start of the new year.
It posted declines on Tuesday and Wednesday as investors grew cautious about the timing of possible interest rate cuts from the U.S. Federal Reserve.
Activity in Canada’s service sector deteriorated for a seventh consecutive month in December as elevated borrowing costs weighed on the housing market, S&P Global Canada services PMI data showed Thursday.
Financials, the most heavily weighted sector on the TSX rose 0.5% and industrials were up 0.6%. Technology was another standout, rising 0.6%.
Energy fell 1.2%, giving back some of Wednesday’s big gain, as the price of oil settled 0.7% lower at US$72.19 a barrel, under pressure from a massive U.S. fuel inventory build.
In stock news, Endeavor Mining said it had removed CEO Sebastien de Montessus with immediate effect, citing “serious misconduct.” Its shares ended down 10.1%.
Meanwhile, financials was one of the few gainers among the S&P 500 sectors, underpinned by Allstate, which rose 2.4% to close at an all-time high after Morgan Stanley lifted its rating on the insurer to “overweight.”
Other insurers also rose, including Hartford Financial Services Group, which gained 0.7% to its highest finish since 2008.
Banks were strong performers ahead of the start of earnings season next week. JPMorgan Chase & Co and Truist Financial Corp were among those which advanced, up 0.7% and 1.3% respectively, after both received positive analyst reports from BofA Global Research.
Last year was one of substantial upheaval in the banking sector, as institutions managed the impact of rapid increases in central bank rates on their balance sheets.
Banks should benefit in 2024 from lower-yielding investments rolling off and being reinvested in new securities with higher yields, said Ian Lapey, portfolio manager of The Gabelli Global Financial Services Fund.
Coupled with rotation out of more speculative, growth names, banks with strong management teams will reward investors, he added.
“We’re setting up for significant relative outperformance of the strongly managed and financed banks and other financials, as compared to other, more expensive areas of the market.”
The S&P 500 lost 16.13 points, or 0.34%, to end at 4,688.68 points, while the Nasdaq Composite lost 81.91 points, or 0.56%, at 14,510.3. The Dow Jones Industrial Average rose 10.15 points, or 0.03%, to 37,440.34.
Most S&P sectors were down, led by energy which fell 1.6%.
A number of big-tech names also ended lower, with Amazon.com Inc down 2.6% and Alphabet Inc declining 1.8%. Apple shares slid 1.3% after brokerage Piper Sandler downgraded the iPhone maker to “neutral,” days after Barclays also cut its rating.
Mobileye Global sank 24.5% after forecasting preliminary fiscal 2024 revenue below estimates, while Walgreens Boots Alliance dropped 5.1% after the U.S. pharmacy chain nearly halved its dividend.
The volume on U.S. exchanges was 11.13 billion shares, compared with the 12.30 billion average over the last 20 trading days.
Reuters, Globe staff
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