Brace for a ‘crazy week in the stock market’

After staging an end-of-year rally anticipating interest rate cuts, the U.S. stock market has commenced 2024 on a losing streak, with most equities erasing short-term gains.

Notably, the stock market’s performance in the first week of 2024 marked the end of a nine-week bull run, signaling one of the worst starts to the year in recent times.

This correction comes when investors are torn between the hope of interest rate cuts and the fear that a robust economy may postpone any potential monetary easing.

For instance, the tech-heavy Nasdaq Composite traded in the red for five consecutive days, dipping over 3%, although it rallied almost 1% on Friday, December 5.

Some stocks tracked under the index, such as the tech giant Apple (NASDAQ: AAPL), closed the week with over 6% in losses. These losses emerged after Piper Sandler downgraded the stock.

Elsewhere, Microsoft (NASDAQ: MSFT) experienced a decline of over 2%. E-commerce giant Amazon (NASDAQ: AMZN) was also one of the significant stock losers, having corrected over 5% over the five days.

The S&P 500 managed a 0.2% gain as the week concluded, capping the stock market’s most challenging week since late October. The benchmark began the new year by ending its bull run, experiencing losses of almost 2%.

The banking sector witnessed notable performances from market giants, with several recording modest gains. JPMorgan Chase (NYSE: JPM), for instance, registered an increase of over 1% in the initial week of 2024, while Bank of America  (NYSE: BAC) saw a rise of approximately 1.6%.

Impact of employment data

Friday saw short-term gains materialize as the U.S. economy exceeded expectations in job additions for December. Nonfarm payrolls grew by 216,000, surpassing the anticipated 170,000 for the month. The unemployment rate remained stable at 3.7%, indicating sustained labor market strength.

The robust labor market performance raises the possibility that the Federal Reserve might delay its anticipated rate cuts, a move eagerly awaited by traders. Before the strong data release on Friday, traders were optimistic about the Fed initiating rate cuts as early as March, potentially lowering them by as much as six times in 2024. However, these expectations will now need to be put on hold.

With a rough start to 2024, analysts have a consensus that the performance might signal what to expect for the rest of the year. Soma analysts suggest that the year tends to play out in January. 

Stock market uncertainty prevails 

Despite modest gains on Friday, the overall stock market outlook remains uncertain. In the short-term stock market analyst by the X (formerly Twitter), pseudonym StockMKTNewz noted that investors should expect ‘a crazy week head’ in the market.

In addition to anticipating the Fed’s policy stance, traders are directing their attention toward geopolitical tensions in the Middle East.

Against the backdrop of this conflict, the Danish shipping giant Maersk has declared its decision to reroute vessels away from the Red Sea for the “foreseeable future” due to attacks by Houthi militants based in Yemen. 

Notably, various shipping companies have increasingly opted for diversions from this crucial trade route in recent weeks, sparking concerns about potential inflation and disruptions in the supply chain.

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