Before we start your new (trading/investing) year on a sour note, allow us to remind you that the major indices have a nine-week winning streak. That streak has produced some massive gains, which led to the happiest end of the old year.
Briefly, the Nasdaq Composite soared 43.4% in 2023, the S&P 500 surged 24.2%, the Russell 2000 was up 15.1%, the S&P Midcap 400 rose 14.5%, and the Dow Jones Industrial Average gained 13.7%.
Now, for the sour news: the S&P 500 futures are down 38 points and are trading 0.7% below fair value, the Nasdaq 100 futures are down 182 points and are trading 1.0% below fair value, and the Dow Jones Industrial Average futures are down 237 points and are trading 0.5% below fair value.
The major indices, therefore, will be starting 2024 on a down note — certainly at the start of today’s trading.
Notwithstanding the extended winning streak, we are not sure this negative disposition is all that surprising to market participants, who recognized that there was some performance chasing at the end of 2023 and that some profit taking was bound to happen in the wake of a parabolic advance.
Barclays has helped given market participants a profit taking nudge by downgrading Apple (AAPL) to Underweight from Equal Weight due in part to concerns about weak iPhone sales volumes.
Shares of AAPL are down 2.2% in pre-market trading. In fact, most of the mega-cap stocks are down in pre-market trading and that is taking its toll on the futures for the major indices.
You can sense this morning’s profit-taking urge, too, in the behavior of NVIDIA (NVDA) and Uber (UBER). Stifel named NVIDIA a “best idea” for 2024, but NVDA is down 0.3% in pre-market trading; meanwhile, Wells Fargo labeled Uber a “top pick,” yet UBER is down 1.1% in pre-market trading.
Another convenient reason for some of the early profit taking is the bump seen in Treasury yields. Recall that the Treasury market went on its own tear at the end of 2023, but it is starting 2024 on the defensive despite geopolitical tension in the Red Sea growing more tense after Iran sent a warship there in response to the U.S. destroying three Houthi boats.
WTI crude futures are up 2.3% to $73.27/bbl.
Currently, the 2-yr note yield is up 10 basis points to 4.35% and the 10-yr note yield is up nine basis points to 3.97%. The U.S. Dollar Index, however, looks to be reflecting a bit more of the geopolitical angst. It is up 0.7% to 102.05.
The Treasury market should be a hotbed of trading interest this week, which will also feature the release of the December ISM Manufacturing Index, JOLTS – Job Openings Report, and the FOMC Minutes on Wednesday followed by the December Employment Situation Report and ISM Non-Manufacturing Index on Friday.
—
Originally Posed January 2, 2024 – Market downshifts to start 2024
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Briefing.com and is being posted with its permission. The views expressed in this material are solely those of the author and/or Briefing.com and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.
Disclosure: Forex
There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.
