(Bloomberg) — An early rally in stocks collapsed and major U.S. indexes appeared poised to extend the selloff that trimmed more than $1 trillion from stock prices over the past four sessions. Tesla’s post-Christmas decline swelled to nearly 20% after its annual car sales fell.
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Treasury yields drifted higher, pushing 10-year interest rates about 20 basis points above the level prior to Jerome Powell’s hawkish shift at the Fed’s Dec. 18 meeting. The big moves spread across asset classes after Powell’s board expressed waning enthusiasm for cutting interest rates. The Cboe Volatility Index rose for the fourth time in five days.
Among individual stocks, Tesla stock was the worst performer, falling 6.9% after the e-car company’s fourth-quarter deliveries beat estimates and annual sales fell for the first time in more than a decade.
This year will be a “showcase year” for corporate earnings, according to Lisa Shalit of Morgan Stanley Wealth Management. As for the bleak end of 2024, it’s too early to call it a bad omen, she told Bloomberg TV.
Treasuries erased an early advance after the weekly unemployment claims reading fell to an eight-month low. Bloomberg’s gauge of dollar strength traded at its highest level in more than two years.
“Seasonal adjustment challenges could make unemployment claims readings particularly volatile during the holiday season,” Goldman Sachs economists led by Jan Hatzius noted.
US stocks were struggling to halt a string of losses that had taken some of the shine out of the S&P 500’s best two-year performance dating back to the late 1990s. The index has risen more than 50% since the beginning of 2023, driven by gains in technology giants amid enthusiasm about increased profits from artificial intelligence.
“At the beginning of the year, analysts tend to be quite optimistic — you have a very strong year-on-year earnings outlook,” Daniel Morris, chief market strategist at BNP Paribas Asset Management, told Bloomberg TV. “Even if we don’t get 20% Nasdaq earnings growth, the way analysts might suggest, if it’s just 15%, the markets will probably do well.”
Meanwhile, the attack on New Year’s revelers in New Orleans has put US homeland security back in the spotlight less than a month before Donald Trump is sworn in as president. The FBI is investigating this incident as well as the deadly explosion of a Tesla Cybertruck outside the Trump Hotel in Las Vegas.
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