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Tech Tumble and Dollar Surge Kickstart 2024: S&P 500 and Nasdaq Dip, Apple Stumbles!

Market Update - Daniel Ang The Accidental Trader Traders Academy International 6

Introduction:

The opening trading session of 2024 delivered a mixed bag for major U.S. stock indices, with tech giants like Apple facing headwinds and the Dollar flexing its muscles on the global stage.


Key Highlights:

  • 📉 Tech Sector Struggles: Apple’s 3.6% drop, driven by a Barclays downgrade, led a tech-sector retreat affecting Nvidia, Meta, and Microsoft.
  • 💵 Dollar Dominance: A significant 0.799% surge in the Dollar Index, catalyzed by U.S. Treasury yield movements and foreign exchange fluctuations.
  • 🛢️ Crude Concerns: Oil prices hit a 3-week low, influenced by Dollar strength and geopolitical tensions in the Red Sea.

In a somewhat subdued start to 2024, the S&P 500 and Nasdaq Composite closed lower, pressured by a decline in Apple shares following a broker downgrade and a broader fall in big-tech names amid rising Treasury yields. Apple’s 3.6% tumble, sparked by Barclays’ shift to “underweight” on account of softening iPhone demand, rippled through the tech sector. Nvidia, Meta Platforms, and Microsoft also faced declines, ranging between 1.4% and 2.7%.

The S&P 500 shed 27 points, settling at 4,742.83, marking a 0.57% decline, while the Nasdaq Composite dropped 1.63% to 14,765.94. In contrast, the Dow Jones Industrial Average eked out a 0.07% gain, adding 25.5 points to close at 37,715.04.

This lukewarm session follows a robust 2023, where Wall Street’s major indices recorded double-digit gains, fueled by enthusiasm over artificial intelligence advancements and stabilizing inflation. Just last week, the S&P 500 was flirting with record highs from early 2022.

However, investor sentiment dampened as U.S. Treasury yields edged higher. The yield on 10-year notes briefly crossed the 4.000% threshold, a two-week peak, before settling at 3.937%. This shift moderated expectations of rate cuts from the U.S. Federal Reserve, subsequently impacting growth stocks, particularly in the tech sector.

In the currency markets, the Dollar’s opening day strength in 2024 was unmistakable. Bolstered by rising U.S. yields, the Dollar Index notched a significant 0.799% increase, its most substantial daily percentage gain since October 2023. Concurrently, USD/JPY and USD/CAD experienced upticks, while the AUD/USD faced a downtrend. The EUR/USD also declined amid persistent contraction in the Eurozone’s factory activity, while GBP/USD dipped to 1.2619.

On the commodities front, crude oil prices retreated to a 3-week low, under the dual pressures of a strengthening Dollar and global demand concerns. Brent crude settled down 1.5% at $75.89, while West Texas Intermediate (WTI) crude dropped 1.8% to $70.38 a barrel. These movements were partially attributed to geopolitical developments in the Red Sea, where U.S. Navy action against Houthi militants added to the market’s jitters.

Gold, typically a safe-haven asset, was not immune to the Dollar’s upswing. Spot gold steadied at $2,061.59 per ounce, despite an earlier rally, while COMEX gold futures saw a marginal decrease. Silver, too, recorded a 0.5% drop.

In the digital assets realm, Bitcoin (BTC/USD) opened the year on a high note, climbing 3.3% and reaching its highest level since April 2022. This surge was fueled by growing optimism over the SEC’s potential approval of exchange-traded spot bitcoin applications.

Market focus now turns to the upcoming release of the FOMC minutes and the U.S. labor report, eagerly awaited by investors for further cues on the economic landscape as 2024 unfolds.

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