Trading was choppy throughout the day, and the Dow was down more than 700 points at session lows. There was no apparent news catalyst for Monday’s decline, and trading was expected to be light given the shortened week. The SPDR S&P 500 Trust (SPY) had about 47 million shares in total trading volume, a relatively low amount for a day with a significant market decline.
The major averages are heading into the year-end shy of record levels, with the S&P 500 and Dow up about 24% and 13%, respectively, and on track for the best year since 2021. The Nasdaq has gained almost 30% in 2024 and is on pace for its longest quarterly winning streak since 2021.
However, some worries have mounted that the market may be losing momentum, with what appears to be year-end profit-taking after the major averages notched losing sessions Friday. Large tech stocks struggled again Monday, with shares of Tesla losing 3.3% and Meta Platforms falling 1.4%. Chip giant Nvidia did rise 0.4%, helping to stem losses elsewhere.
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“I really think we’re going to take a pause this next year,” Jeremy Siegel, senior economist at WisdomTree and emeritus professor of finance at University of Pennsylvania’s Wharton School of Business, said Monday on CNBC’s “Squawk on the Street.”
“I think the probability of a correction next year, which is defined as a 10% drop in the S&P, is getting higher,” Siegel said. “The major forces to propel things upward I think have already been built in.”
Trading in the bond market could also be contributing to the pullback in tech stocks. The 10-year Treasury yield traded above 4.6% last week, though it retreated Monday.
Investors are hoping that stocks will find their footing again and trigger what’s known as a Santa Claus rally. The phenomenon refers to the market rising into the final five trading days of a calendar year and the first two in January. The S&P 500 has returned 1.3% on average during this period since 1950, according to LPL Financial.
Instead, the S&P 500 has now fallen more than 1% in each of the past two trading sessions. This is the first time that has happened twice in the last five business days of the year since at least 1952, according to Bespoke Investment Group.
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However, investors shouldn’t worry too much about late-year weakness, Tom Lee, Fundstrat’s head of research, said Monday on “Squawk Box.”
“It is not a liquid environment because we’re in the final two days of the year,” Lee said. “Strangely, if the last week of December is weak, I actually think it bodes well for a rebound in the first week of January.”
The upcoming days are a light period for economic data, with the market closed Wednesday in observance of New Year’s Day. The Chicago purchasing managers index for December did miss expectations on Monday, coming in at 36.9. Economists surveyed by Dow Jones were expecting a reading of 42.2.
