US stocks concluded Christmas week with a retreat from earlier gains as investors opted for profit-taking in light trading. Despite slight losses on Friday, the year-end rally crowned a stellar 2024 performance for Wall Street, fueled by strong U.S. growth prospects and optimism surrounding the incoming Trump administration.
- Stock Market Performance:
- The S&P 500 fell 1.11% on Friday, capping a weekly gain of 0.67%. It has gained 25% year-to-date.
- The Nasdaq Composite dropped 1.49% on Friday, ending the week up 0.31%. It is up 31% for the year.
- The Dow Jones Industrial Average slipped 0.77% but remains up 14% for the year.
- Profit-taking hit high-growth “Magnificent 7” tech stocks, including Tesla (-4.9%), Amazon, Microsoft, and Nvidia.
- Global Market Reactions:
- MSCI’s global share index fell 0.59% Friday but ended the week up 1.45%.
- Europe’s Stoxx 600 rose 0.67% for the day and was up 1% for the week.
- Asia-Pacific markets showed modest gains, with Tokyo’s Nikkei rising 1.8%.
- Treasury Yields:
- The 10-year U.S. Treasury yield rose to 4.625%, its highest since early May, reflecting higher interest rate expectations.
- The two-year Treasury yield eased slightly to 4.328%.
- Dollar Strength:
- The U.S. dollar index gained nearly 7% for the year, buoyed by expectations of slower Federal Reserve rate cuts and economic policies from the Trump administration.
- The dollar strengthened significantly against the yen (+12% for 2024) and the euro (-5.6% for the euro year-to-date).
- Commodities:
- Gold prices dipped 0.74% on Friday to $2,615.54 per ounce, though it logged a 27% yearly gain, its best performance since 2011.
- Brent crude futures rose 0.67% to $73.75 per barrel, supported by potential economic stimulus in China.
- Cryptocurrency:
- Bitcoin declined 1.26% to $94,485, maintaining its status as a volatile asset despite significant gains earlier this year.
Economic and Policy Outlook
- U.S. Growth and Inflation:
- President-elect Donald Trump’s proposed tax cuts, tariffs, deregulation, and immigration policies are expected to boost U.S. economic growth, although concerns about inflation persist.
- Fed Chair Jerome Powell highlighted a cautious approach to further interest rate cuts, while markets anticipate just 37 basis points of cuts in 2025.
- Global Central Banks:
- The Bank of Japan is expected to maintain loose monetary policy, while the European Central Bank is likely to cut rates further as the eurozone economy slows.
The year-end pullback reflects investor caution in thinly traded markets, but 2024 has been a remarkable year for U.S. stocks. As 2025 approaches, markets face uncertainty tied to Trump administration policies, interest rates, and global economic conditions. Analysts see potential upside but warn of limited room for further gains amid high valuations.
