Nasdaq 100 Drops Over 1%, Bonds Retreat From Rally: Markets Wrap

(Bloomberg) — US stocks and Treasuries dropped as traders trimmed their bets on interest-rate cuts and speculated that the recent rally has been overdone.

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The Nasdaq 100 index slid as much as 1.9%, the benchmark’s biggest drop in about a month, as the tech sector giants dubbed the Magnificent Seven faltered. Apple Inc. fell after an analyst at Barclays Plc warned that iPhone demand is cooling. Tesla Inc. slumped after its quarterly production results. The 10-year Treasury yield rose to 3.94%.

The first trading day of the new year brought 2023’s scorching rally to a halt after a more than $8 trillion surge in the S&P 500 last year.

Fundstrat Global Advisors LLC’s Tom Lee, who was among the few to forecast last year’s rally, still expects stocks to do well in 2024. But, he noted, the first five days of January will set the tone.

If the first five days are weak, that could negate his bullish call, Lee said. He expects new highs in January followed by consolidation in the first half.

Read more: Here’s (Almost) Everything Wall Street Expects in 2024

Oppenheimer Asset Management’s Chief Investment Strategist John Stoltzfus is also bullish on 2024 though he sees US stocks as due for a breather.

“It’s not uncommon for markets to pause to digest a bull run of the magnitude experienced in the fourth quarter just ended,” said Stoltzfus. “In fact it would appear to us to make good sense for markets to pause considering the run-up in stock prices.”

The next earnings season could see the advance resume, he added.

The dollar gained 0.7%, with almost all emerging-nation currencies trading lower against the greenback. The yen weakened in thin trading as investors monitored conditions after an earthquake in Japan on Monday.

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Bitcoin climbed above $45,000 for the first time in almost two years. Anticipation is intensifying around the expected US approval for an exchange-traded fund investing directly in the biggest token.

Oil steadied after trading above $72 a barrel.

In Asia, sentiment was dented after Chinese President Xi Jinping acknowledged some companies and citizens had endured a difficult 2023 in a rare admission of domestic headwinds facing the country.

Slump Signal

Adding to pressure on China’s markets, people familiar said ASML Holding NV, which makes semiconductor manufacturing equipment, canceled shipments of some of its machines to China at the request of US President Joe Biden’s administration.

Despite the persisting weakness in China, some investors consider a slump of almost 60% as a signal to buy Chinese stocks. Almost a third of 417 respondents to Bloomberg’s latest Markets Live Pulse survey say they will increase their China investments over the next 12 months.

Key events this week:

• Germany unemployment, Wednesday

• US FOMC minutes, ISM Manufacturing, job openings, light vehicle sales, Wednesday

• Richmond Fed President Tom Barkin — an FOMC voter in 2024 — speaks, Wednesday

• China Caixin services PMI, Thursday

• Eurozone S&P Global Eurozone Services PMI, Thursday

• US initial jobless claims, ADP employment, Thursday

• Eurozone CPI, PPI, Friday

• US nonfarm payrolls/unemployment, factory orders, ISM services index, Friday

• Richmond Fed President Tom Barkin — an FOMC voter in 2024 — speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.7% as of 10:56 a.m. New York time

• The Nasdaq 100 fell 1.7%

• The Dow Jones Industrial Average was little changed

• The Stoxx Europe 600 fell 0.2%

• The MSCI World index fell 0.9%

Currencies

• The Bloomberg Dollar Spot Index rose 0.7%

• The euro fell 0.9% to $1.0948

• The British pound fell 0.8% to $1.2623

• The Japanese yen fell 0.8% to 141.96 per dollar

Cryptocurrencies

• Bitcoin rose 3.8% to $45,267.78

• Ether rose 1% to $2,362.33

Bonds

• The yield on 10-year Treasuries advanced six basis points to 3.94%

• Germany’s 10-year yield advanced four basis points to 2.06%

• Britain’s 10-year yield advanced 11 basis points to 3.64%

Commodities

• West Texas Intermediate crude fell 0.2% to $71.52 a barrel

• Spot gold fell 0.2% to $2,058.34 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Alex Nicholson, Joanna Ossinger, Zhu Lin and Tassia Sipahutar.

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