Market stumbles into 2024 - Creand
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Market stumbles into 2024

The S&P 500 closed out 2023 with a bang as the index posted gains for nine straight weeks.  The market, however, stumbled into 2024. Profit-taking activity in the mega cap stocks, and other growth that outperformed last year, weighed on the market.  The S&P 500 shed 1.5% while the Nasdaq lost 3.3%.  Apple (AAPL) helped set this negative tone, dropping more than 3.0% on the first day of the new year after a Wall Street analyst downgraded it to Underweight. 

The only three S&P 500 sectors to register a decline in 2023 saw some of the largest gains last week. The utilities sector, which fell 10.2% last year, logged a 1.8% gain this week. The energy sector, which declined 4.8% in 2023, climbed 1.1% this week. The consumer staples sector, which fell 2.2% last year, closed with a 0.03% gain this week.  The health care sector was another top performer, registered a 2.1% gain. It was also among the worst performing sectors last year.  Meanwhile, the heavily-weighted information technology (-4.1%) and consumer discretionary (-3.5%) sectors saw the largest declines after having massive outperformance last year.

In addition to profit-taking activity, rising interest rates also contributed to the negative action this week after the yield on the US Treasury passed 4.00%. The 10-yr note yield climbed 16 basis points to 4.04% and the 2-yr note yield rose 14 basis points to 4.39%.

The price action in Treasuries was partially due to a recalibration of rate-cut expectations after the Minutes from the December 12-13 FOMC meeting were less dovish than hoped. In discussing the policy outlook, the committee viewed the policy rate as likely at or near its peak for this tightening cycle. The Fed made it clear, however, that it isn’t divorcing itself entirely from the idea that it might still have to raise rates again.