Traders work on the floor at the New York Stock Exchange.
Brendan Mcdermid | Reuters
Stock futures were slightly lower ahead of the final trading session of 2024, following another booming year for Wall Street that hoisted the S&P 500 to its second consecutive annual gain exceeding 20%, spurred by enthusiasm for rate cuts, economic strength and artificial intelligence.
Futures tied to the Dow Jones Industrial Average were little changed, while S&P 500 futures edged down 0.1%. Nasdaq-100 futures lost nearly 0.1%.
The S&P has surged more than 23.8%, putting it solidly on pace for its second consecutive gain above 20%. The Dow Jones Industrial Average has added nearly 13%, while the Nasdaq Composite has outperformed with a 29.8% advance.
The story surrounding AI and its potential productivity boost powered significant gains for the major averages throughout the year, pushing “Magnificent Seven” stocks such AI chip darling Nvidia and iPhone giant Apple to new highs. The megacap technology gains also lifted the major averages to record levels.
Stocks also benefited as the Federal Reserve began cutting rates on the heels of one of its most aggressive hiking cycles in recent history, spurring hopes for a period of economic growth as borrowing costs ease. Since September, the central bank has lowered rates by 100 basis points. Although further rate cuts are expected in the new year, the Fed’s pace may slow from initial expectations.
President-elect Donald Trump’s successful reelection campaign in November also proved a boon for the market, fueling hopes of deregulation, lower corporate tax rates and a focus on the U.S. economy, which has remained resilient. Expectations for a cryptocurrency-friendly administration powered bitcoin to a record above $108,000. Tesla was another big election winner due to CEO Elon Musk’s close ties to Trump.
The Nasdaq and S&P have surged 7.1% and 2.5%, respectively, this quarter and are both on pace for a fifth consecutive positive quarter for the first time since 2021. The Dow is up a mere 0.6% over the same period for its fourth positive quarter in five.
Despite the strong year-to-date performance, Wall Street is entering the final day of the year on sour note as the market has lost some of its momentum in recent sessions. December has been a weak stretch for equities as investors take profits in some of 2024’s biggest winners and fears mount over rising rates into year-end. The Dow is down 5.2% for its worst month since September 2022. The Nasdaq is up 1.4%, while the S&P is down 2.1% and headed for its worst month since April.
“It sort of makes sense, if you think about it,” Bespoke Investment Group co-founder Paul Hickey told CNBC’s “Closing Bell: Overtime” on Monday. “You go into the end of the year with market up a lot, you’re coming in with a new administration — so the uncertainty is going to be there. You can’t fault investors for ringing the register a little bit here.”
The loss in momentum has also dashed investor hopes for a Santa Claus rally, which occurs when the market rises during each of the five final trading days of a calendar year and the first two trading days of January. Instead, the S&P 500 has dropped at least 1% during each of the past two trading days.
The Dow finished Monday’s choppy trading session with a loss exceeding 418 points, or 0.97%. The S&P plunged 1.07%, while the Nasdaq shed 1.19%.
The market is closed on Wednesday for New Year’s Day.