The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -0.74%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.63%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.84%. March E-mini S&P futures (ESH26) fell -0.71%, and March E-mini Nasdaq futures (NQH26) fell -0.89%.
Stock indexes retreated on Wednesday, with the S&P 500, the Dow Jones Industrial Average, and the Nasdaq 100 sliding to 1.5-week lows. The weakness in chip stocks and data storage companies led the broader market lower on the last trading day of the year. Also, mining stocks slid on Wednesday, with gold prices falling to a 2.5-week low and silver prices plunging more than -9%. In addition, higher bond yields are negative for stocks, as the 10-year T-note yield climbed +4 bp to 4.16% after weekly jobless claims unexpectedly fell to a 1-month low, a hawkish factor for Fed policy.
Trading activity was subdued on Wednesday, with volumes well below normal, as markets in Germany and Japan were closed for the New Year’s holiday.
US weekly initial unemployment claims unexpectedly fell -16,000 to a 1-month low of 199,000, showing a stronger labor market than expectations of an increase to 218,000.
Wednesday’s better-than-expected Chinese economic news is supportive of global growth prospects. The China Dec manufacturing PMI rose +0.9 to 50.1, stronger than expectations of no change at 49.2 and the fastest pace of expansion in 9 months. Also, the Dec non-manufacturing PMI rose +0.7 to 50.2, stronger than expectations of 49.6.
Seasonal factors are bullish for stocks. According to data from Citadel Securities, since 1928, the S&P 500 has risen 75% of the time in the last two weeks of December, climbing 1.3% on average.
Market attention this holiday-shortened week will focus on US economic news. On Friday, the Dec S&P manufacturing PMI is expected to remain unrevised at 51.8.
The markets are discounting the odds at 15% for a -25 bp rate cut at the FOMC’s next meeting on January 27-28.
Overseas stock markets settled mixed on Wednesday. …
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