Stock indexes closed mostly lower Tuesday as the market delivered a downbeat finish on the final day of another milestone-shattering year on Wall Street.
The S&P 500 gave up an early gain to finish down 0.4%. The benchmark index, which set 57 record highs in 2024, racked up a 23.3% gain for the year. This was its second straight year with a gain of more than 20%. The last time the index had as big a back-to-back annual gain was 1998.
The Dow Jones Industrial Average slipped 0.1%, and the Nasdaq composite lost 0.9%.
Big Tech stocks led this year’s rally, pushing the Nasdaq to a yearly gain of 28.6%. The Dow, which is far less weighted with tech, rose 12.9% for the year.
The stock market's record-breaking turn in 2024 was “certainly much better that what most people on Wall Street, myself included, thought we would get this year,” said Sam Stovall, chief investment strategist at CFRA.
U.S. markets’ stellar run was driven by a growing economy, solid consumer spending and a strong jobs market.
Skyrocketing prices for companies in the artificial-intelligence business, such as Nvidia and Super Micro Computer, helped lift the market to new heights.
Solid corporate earnings growth also helped. Wall Street expects companies in the S&P 500 to report broad earnings growth of more than 9% for the year, according to FactSet. The final figures will be tallied following fourth-quarter reports that start in a few weeks.
Another boost for the market: The economy avoided a recession that many on Wall Street worried was inevitable after the Federal Reserve hiked its main interest rate to a two-decade high in hopes of slowing the economy to beat high inflation.
Receding inflation, which has gotten closer to the Fed’s 2% target, helped energize Wall Street, raising hopes that the central bank would deliver multiple interest rate cuts into next year, which would ease borrowing costs and fuel more economic growth.
Still, after three interest rate cuts in 2024, the Fed has signaled a more cautious approach heading into 2025 with inflation remaining sticky as the country prepares for President-elect Donald Trump to transition into the White House. Trump’s threats to hike tariffs on imported goods have raised anxiety that inflation could be reignited as companies pass along the higher costs from tariffs.
This year’s market rally went beyond stocks. Bitcoin, which was below $17,000 just two years ago, climbed above $100,000 for the first time. And gold also shattered records on its way to a 27.4% gain for the year.
Only about 38% of the stocks in the S&P 500 fell Tuesday, but a slide in technology stocks outweighed gains elsewhere in the market.
Semiconductor giant Nvidia, whose enormous valuation gives it an outsize influence on indexes, fell 2.3%. Apple dropped 0.7%, and Advanced Micro Devices gave up 1.3%.
Gains in energy stocks helped temper some of the declines. Exxon Mobil rose 1.7% and Chevron gained 1.2%.
VeriSign rose 0.9% after Warren Buffett's Berkshire Hathaway disclosed it had increased its stake in the internet domain registry services company.
All told, the S&P 500 fell 25.31 points to 5,881.63 on Tuesday. The Dow lost 29.51 points to close at 42,544.22, and the Nasdaq slid 175.99 points to finish at 19,310.79.
The market's mini post-Christmas slump doesn't bode well for a ‘Santa Claus’ rally, the term for when U.S. stock indexes get a boost in the last five trading days of a year, plus the first two in the new year. Such a rally correlates closely with positive returns in January and the upcoming year. Even so, missing out on the Santa Rally isn’t necessarily a negative omen.
“Historically, a negative Santa Claus rally still resulted in an average gain of almost 6% in the subsequent year,” Stovall said.
Bond yields were mixed. The yield on the 10-year Treasury rose to 4.57% from 4.54% late Monday. The yield on the two-year Treasury held steady at 4.24%.
Crude oil prices rose 1%.
Indexes in Europe mostly rose. Asian markets ended mixed, with exchanges in Tokyo and Seoul closed for New Year holidays.
Markets will be closed on Wednesday for the New Year’s Day holiday. On Thursday, investors will get an updated snapshot of U.S. construction spending for November. On Friday, Wall Street will receive an update on manufacturing for December.
Meanwhile, the New York Stock Exchange and Nasdaq will close their equity and options markets on Jan. 9 in observance of a National Day of Mourning for former President Jimmy Carter, continuing a long-held Wall Street tradition in mourning the nation’s leaders. The 39th U.S. president and global humanitarian died on Sunday at his home in Plains, Georgia. He was 100 years old.
