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Market Overview: A Look at Recent Stock Performance

Current Trading Trends

In an unsettling turn of events, stocks experienced a downturn on Monday, as one of the final trading days of 2024 drew near. This drop could potentially mar what had otherwise been a remarkable year for investors. The Dow Jones Industrial Average, a critical indicator of overall stock market trends, fell by 608 points, equating to a decline of 1.4%. Similarly, the S&P 500 and the Nasdaq Composite followed suit, each losing 1.4% and 1.5%, respectively.

Volume and Market Activity

Interestingly, the day saw no obvious news catalyst to explain this trading decline. Additionally, activity was expected to remain subdued due to the shortened trading week. For instance, the SPDR S&P 500 Trust (SPY) recorded a total volume of less than 11 million shares by around 10:30 a.m. ET—an unusually low figure for a day accompanying such a significant market downturn.

Year-End Performance Metrics

As we approach the year-end, the major market averages are ending the year slightly off their record levels. Yet, there is still a silver lining: the S&P 500 and the Dow have boosted by more than 23% and 12%, respectively, positioning them for their best yearly performance since 2021. The Nasdaq has emerged as a standout, achieving a remarkable gain exceeding 29% throughout 2024.

Adding to this good news, the benchmarks are set to finish the fourth quarter on a winning note, with the Nasdaq getting ready for its longest quarterly winning streak since 2021.

Emerging Concerns

Despite the overall positive yearly performance, there are growing concerns that the market might be losing some of its momentum. Observers note that year-end profit-taking may be contributing to the downward trend witnessed on Friday. Major technology stocks also found themselves struggling; for instance, shares of Tesla decreased by 2.2%, while Amazon fell 1.2%. However, chip giant Nvidia managed to inch up by less than 1%, helping to mitigate some losses.

Prominent economist Jeremy Siegel, a senior economist at WisdomTree and an emeritus professor of Finance at The Wharton School, commented on "Squawk on the Street," predicting a possible pause in market growth in the coming year. Siegel conveyed, "As time has gone on, the probability of a correction next year, defined as a 10% drop in the S&P, is getting higher… The major forces propelling upward momentum have mostly been accounted for."

Bond Market Impact

In addition to stock market fluctuations, activities in the bond market may be fuelling this pullback in tech stocks. The yield on the 10-year Treasury, which had been above 4.6% last week, showed a slight retreat on Monday morning. Such shifts can create ripples across equity markets, complicating investment decisions for many.

Optimism for the Future

Looking ahead, investors are holding out hope for stocks to regain their footing and initiate what’s commonly referred to as a Santa Claus Rally. This rally is associated with market gains during the final five trading days of the calendar year and the first two trading days of January. According to LPL Financial, the S&P 500 has historically returned an average of 1.3% during this period since 1950.

Fortunately, leading investment strategist Tom Lee, head of research at Fundstrat, downplayed the significance of late-year stock weakness during his appearance on "Squawk Box." He asserted that the liquidity issues in the final days of the year could create an interesting dynamic. Lee explained, "Strangely, if the last week of December is weak, I actually think it bodes well for a rebound in the first week of January."

Looking Ahead: Lack of Economic Data

As we move forward, the next few days promise to be light on significant economic data, particularly since the market will be closed on Wednesday in observance of New Year’s Day. Notably, the Chicago Purchasing Managers Index for December fell short of expectations on Monday, landing at 36.9, whereas economists surveyed by Dow Jones had anticipated a reading of 42.2.

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