CEO Sightings

Stocks Plunge in 2024: S&P 500 and Nasdaq Face Historic Start, Job Report Stirs Uncertainty

By:JJ Kinahan

Tech giants have a dismal beginning of the year, while bonds echo equites’ losses and job creation surges

  • The year gets off to a bleak start with the S&P 500 and Nasdaq slumping. Meanwhile, investors are questioning historical January trends amid a surge in employment.
  • Tech giants are stumbling—Apple, Tesla and Nvidia are sliding in contrast to surges for Peloton and Eli Lilly.
  • Bonds are mimicking equities' losses, yields are surging and a robust jobs report is changing rate cut expectations significantly.

The initial days of 2024 have left much to be desired in the stock market, signaling a somewhat bleak start to the year's trading. The S&P 500, experiencing a 0.3% loss on yesterday, has plummeted by nearly 2% in the first three days—a notably dismal kickoff, its worst since 2016. Similarly, the Nasdaq Composite faced its fifth consecutive day of losses, with a 0.6% dip on yesterday, culminating in a 3.3% year-to-date decline—the bleakest start since 2005. This downturn appears out of character for a historically robust month, leaving the market observers intrigued about the potential for additional pullbacks, especially after today's stronger-than-anticipated employment report.

Historical data, as per The Wall Street Journal, reveals January's market performance trends. Since 1928, the S&P 500 rallied 60% of the time in January, typically yielding an average gain of 1.2%. The Nasdaq Composite, even more robust historically, boasted an average January gain of 2.5%. Additionally, a positive January often foreshadows an auspicious year overall, with the S&P 500 averaging a 9.2% annual gain in such instances compared to just over 2% when January doesn't rally. Yet, considering the market's present state, there's still ample room for potential market reversal, given the year's infancy.

Not so magnificent after all?

For a potential market turnaround, fresh leadership might be the need of the hour. The prior year's "Magnificent Seven" stocks have endured a rocky beginning, all seven seeing a decline in the new year. Apple (AAPL) suffered a 5.5% decline, shedding a substantial $165 billion in market capitalization. Tesla (TSLA) slid over 4%, while Nvidia (NVDA), last year's darling, experienced a 3% downturn, showing mixed signs in premarket trading.

Tesla made headlines with a recall of 1.63 million cars in China, addressing autosteering issues through a software update. This move, although a recall, showcases Tesla's capability to resolve concerns without hardware alterations, following similar domestic recalls.

In contrast, individual stocks like Peloton (PTON) surged by over 25% after announcing it would collaborate with TikTok on fitness videos. Eli Lilly (LLY) dipped slightly but had a 5% year-opening rally, unveiling an online telehealth service for Zepbound deliveries, an anti-obesity drug. Conversely, Walgreens Boots Alliance (WBA) initially plummeted by 12% before a partial recovery, triggered by a surprise announcement of nearly halving its dividend.

Bonds mirrored equities' losses, prompting a surge in yields. The 10-year note breached 4% for the second consecutive day before slightly retracting to close below 3.99%, and in premarket trading, soaring back to 4.07%.

A strong jobs report

The report that the economy created of 216,000 jobs in December with an unemployment rate of 3.7% surpassed expectations of 170,000 new jobs. However, revisions to November and October employment figures, down by 26,000 and 45,000 respectively, continued a trend from 2023, which could be a crucial factor in 2024's market trajectory. The unexpected job surge has already influenced rate cut expectations, diminishing the likelihood from 66% to just over 50% for March, significantly altering investors' sentiments.

Amid shifting market dynamics, the anticipated interest rate changes have been a critical factor driving stocks. Any alteration in these expectations might significantly influence market responses. In such uncertain times, adhering to investment plans and long-term goals remains prudent.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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