The Stock Market Registered Losses Following Nine-Straight Weeks Of Gains To Close Out 2023.
Profit-taking activity in the mega cap stocks, and other stocks that outperformed last year, contributed to the downbeat price action.
Apple was a standout loser, dropping nearly 6.0%, after two analyst downgrades and news that the DOJ is getting close to filing an antitrust case against Apple, according to The New York Times.
Notably, areas of the market that held up better this week compared to mega caps were either left out of the last year's gains or saw less robust gains than the mega cap stocks. The Russell 3000 Growth Index sank 2.8% versus a 0.6% decline in the Russell 3000 Value Index.
The only three S&P 500 sectors to register a decline in 2023 saw some of the largest gains this week. The utilities sector, which fell 10.2% last year, logged a 1.8% gain this week. The energy sector, which declined 4.8% in 2023, climbed 1.1% this week. The consumer staples sector, which fell 2.2% last year, closed with a 0.03% gain this week.
The health care sector was another top performer, registered a 2.1% gain. It was also among the worst performing sectors last year, eking out a 0.3% gain.
Meanwhile, the heavily-weighted information technology (-4.1%) and consumer discretionary (-3.5%) sectors saw the largest declines after outperforming last year.
In addition to profit-taking activity, rising market rates also contributed to the negative bias this week after the 10-yr yield passed 4.00%. The 10-yr note yield climbed 16 basis points to 4.04% and the 2-yr note yield rose 14 basis points to 4.39%.
The price action in Treasuries was partially due to a recalibration of rate-cut expectations after the Minutes from the December 12-13 FOMC meeting were less dovish than hoped. In discussing the policy outlook, the committee viewed the policy rate as likely at or near its peak for this tightening cycle. The Fed made it clear, however, that it isn't divorcing itself entirely from the idea that it might still have to raise rates again.
Some economic releases on Friday added to the rate-cut uncertainty. The December Employment Situation Report featured better than expected nonfarm payrolls, average hourly earnings, and a steady unemployment rate versus expectations for an increase. The December ISM Services PMI showed a larger than expected deceleration in December service sector growth.
The solid employment numbers may keep the Fed from cutting rates as much as the market had expected, whereas the soft reading for business activity in the nation's largest sector would perhaps keep the Fed aligned with the market's rate-cut expectations.
The probability of a 25 basis points rate cut to 5.00-5.25% at the March FOMC meeting is 68.3% versus 88.5% last week.
In other news, geopolitical worries intensified in the Red Sea after Iran sent a warship there in response to the U.S. destroying three Houthi boats.
Dow Jones Industrial Average: -0.6% for the week / -0.6% YTD
S&P 500: -1.5% for the week / -1.5% YTD
S&P Midcap 400: -2.5% for the week / -2.5% YTD
Nasdaq Composite: -3.3% for the week / -3.3% YTD
Russell 2000: -3.8% for the week / -3.8% YTD