U.S. Stocks Trend Lower After Earnings Growth Worries Resurface

Barry Adams
02 Jan, 2024
New York City

Stocks faced selling pressure on the first day of trading in the new year, and Treasury yields edged slightly higher.

The tech-heavy Nasdaq Composite index dropped as much as 1.9% after mega-cap tech stocks eased following a surge in 2023 as investors worried about future earnings growth.

Apple Inc. dropped as much as 3%, Microsoft declined 3%, Amazon fell 1.6%, and Meta Platforms decreased 2.6%.

The broad rally lifted the S&P 500 index by 24% and the Nasdaq Composite by 44% in 2023, surprising many market analysts.

Stocks staged a strong recovery in 2023, powered by the fourth quarter rally in tech stocks and benchmark indexes, the S&P 500 index and the Nasdaq Composite, which gained for nine consecutive weeks in a row.

The surge in market indexes in 2023 has only increased the price-to-earnings multiple of stocks, reflecting slower earnings growth across many industries.

Despite the steady decline in overall inflation in the last nine months, prices are still rising at a faster pace than preferred by policymakers, raising the prospects of interest rates staying higher for longer in 2024.

In today's trading, oil complex stocks rose amid rising tensions in the Middle East, and attacks on merchant ships in the Red Seas stoked fears of a wider war in the region. and potentially disrupting oil supplies.

 

U.S. Indexes and Yields

In December, the S&P 500 advanced 4.7% and the Nasdaq Composite gained 6.1%, and in the fourth quarter, the indexes gained 11.6% and 14.2%, respectively.

The Nasdaq index was up 44.2% in 2023 before Friday's trading, its best annual gain since 2003.

The S&P 500 index decreased 0.7% to 4,734.76, and the Nasdaq Composite dropped 1.9% to 14,732.89.

The yield on 2-year Treasury notes increased to 4.32%, 10-year Treasury notes inched higher to 3.92%, and 30-year Treasury bonds eased to 4.06%.

WTI crude oil decreased $1.31 to $70.29 a barrel, and natural gas prices decreased 10 cents to $2.56 a thermal unit.

Gold decreased $5.11 to $2,068.22 an ounce, and the yellow metal price rose 13% in 2023.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 102.08.

 

U.S. Stock Movers

Tesla increased 0.03% to $248.57, and the electric vehicle maker shipped more than expected vehicles in the fourth quarter.

Vehicle shipments in the fourth quarter increased to 484,507, increasing the total for 2023 to 1,808,581.

Tesla shipped 405,278 electric vehicles in the fourth quarter of 2022 and delivered 1,313,851 in 2022.

Tech stocks were on the defensive after Barclays analyst Tim Long downgraded Apple Inc., citing weakening unit sales of iPhones, iPads, Macs, and wearable devices.

Apple declined 3.2% to $186.43 following the stock downgrade, which dragged down other leading tech companies.

Microsoft fell 1.9% to $368.87, Amazon.com decreased $148.90, and Meta dropped 3.3% to $342.10.

 

European Markets Trade Higher

European markets advanced on the first day of trading in the new year, and investors focused on rising tensions in the Red Sea and debated future interest rate paths.

Market indexes in Frankfurt, Paris, and London edged higher, and bond yields in the eurozone and in the UK increased.

Crude oil jumped as much as 1.5% after the U.S. Navy destroyed three boats operated by Houthi rebels and Iran dispatched warships in the region.

Moreover, tensions also rose between Israel and Hamas as both parties refused to negotiate a settlement.

 

Eurozone Bank Lending Growth Stayed Weak In November 

Bank lending to households slowed in November, but loans to non-financial institutions were unchanged, the European Central Bank reported Monday.

Household lending in the eurozone rose 0.5% from a year ago to Є6.87 trillion, the slowest pace since May 2015.

Lending to corporations was unchanged in the month after falling 0.3% in the previous month.

Overall lending, household and non-financial corporate lending, was steady at 0.4% in November, suggesting a significant slowdown after the European Central Bank launched its aggressive rate hike campaign.

 

Europe Indexes and Yields

The DAX index increased 0.1% to 16,769.39, the CAC-40 index fell 0.2% to 7,530.86, and the FTSE 100 index inched lower by 0.2% to 7,721.52.

The yield on 10-year German bonds increased to 2.07%; French bonds inched higher to 2.60%; the UK gilts edged up to 3.64%; and Italian bonds advanced to 3.74%.

The euro edged lower to $1.098, the British pound inched lower to $1.268, and the U.S. dollar eased to 84.87 Swiss cents.

Brent crude decreased $1.34 to $75.68 a barrel, and the Dutch TTF natural gas decreased by €1.78 to €30.58 per MWh.

 

Europe Stock Movers

Danone SA rose 0.8% to €59.16 after the French dairy company said it had agreed to sell its organic dairy business in the U.S. to a private equity firm, Platinum Equity.

Energy companies traded higher amid rising tensions in the Red Sea after Iran sent warships into the region after the U.S. Navy destroyed three Houthi rebel-controlled ships.

BP plc jumped 1% to 470.85 pence, and Shell PLC advanced 0.02% to 2,572.0 pence.

TotalEnergies SE increased 1.4% to €61.73, and the company said it commenced production at an offshore platform located in the Santos Basin off the coast of Rio de Janeiro, Brazil.

Hapag Llyod gained 1.6% to €138.90 after the German shipping company said on Friday that it plans to divert shipping away from Suez Canal Red Sea shipping lanes for security reasons.

AP Moeller-Maersk gained 4.5% to DKK 12,550.0, and the Danish shipping company temporarily suspended shipping through the Red Sea following an attack on one of its ships by Yemeni rebels.

Plexus Holdings PLC dropped 19.5% to 16.95 pence after the company expanded its license agreement with Schlumberger NV for $5.2 million.

The new intellectual property agreement provides a royalty-free perpetual-use license to Schlumberger for a wider set of  applications but also frees the company to pursue other clients and markets to license its metal seal technology while continuing to operate in the surface wellhead production sector.