(Bloomberg) — An early rally in equities collapsed and major US benchmarks looked poised to extend a selloff that shaved more than a trillion dollars from share prices over the last four sessions. Tesla Inc.’s post-Christmas slump swelled to nearly 20% after its annual vehicle sales dropped.
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Treasury yields drifted higher, pushing 10-year rates about 20 basis points above the level prior to Jerome Powell’s hawkish turn at a Dec. 18 Federal Reserve meeting. Big moves have proliferated across asset classes after Powell’s board expressed waning enthusiasm for interest rate cuts. The Cboe Volatility Index climbed for the fourth time in five days.
Among individual stocks, Tesla was the worst performer, tumbling 6.9% after the electronic vehicle-marker’s fourth-quarter deliveries missed estimates and annual sales dropped for the first time in over a decade.
This year will be a “show-me year” for corporate earnings, according to Lisa Shalett at Morgan Stanley Wealth Management. As for the grim end to 2024, it’s “too soon to call it a bad omen,” she told Bloomberg Television.
Treasuries erased an early advance after a reading of weekly jobless claims fell to an eight-month low. A Bloomberg gauge of the dollar’s strength traded at a more than two-year peak.
Goldman Sachs economists led by Jan Hatzius noted that “seasonal adjustment challenges can make jobless claims readings particularly volatile around the holiday season.”
US stocks were straining to snap a losing streak that took some shine off the S&P 500’s best two-year run dating back to the late 1990s. The index has surged more than 50% since the start of 2023, driven by gains in the tech megacaps amid enthusiasm about the boost to profits from artificial intelligence.
“At the beginning of the year, analysts tend to be pretty optimistic — you have pretty robust year-on-year earnings forecasts,” Daniel Morris, chief market strategist at BNP Paribas Asset Management, said on Bloomberg Television. “Even if we don’t quite get say 20% earnings growth for Nasdaq, the way analysts might suggest, if it’s only 15, likely markets will do well.”
Meanwhile, an attack on revelers celebrating New Year’s in New Orleans thrust US domestic security back into the spotlight less than a month before Donald Trump is sworn in as president. The Federal Bureau of Investigation is probing that incident as well as the deadly explosion of a Tesla Cybertruck outside of Trump’s hotel in Las Vegas.
A shooting overnight at a nightclub in New York City only added to the anxiety, while authorities said it wasn’t related to terrorism.
A gauge of Wall Street stock sentiment, the VIX, briefly jumped above 18. Readings above 20 indicate mounting concern of near-term volatility.
In the months to come, the growth outlook in Europe and China, the Federal Reserve’s policy path and Trump’s agenda will be among the most pressing items on traders’ radars.
European energy shares outperformed after a sharp increase in natural gas prices as the region braced for freezing winter temperatures without Russian supplies delivered via Ukraine. A transit contract between the two warring nations expired on New Year’s Day, with no alternative in place.
The euro fell to the weakest against the dollar in over two years reflecting concerns about European growth, US trade tariffs and monetary policy divergence with the US. Many strategists are forecasting a slide to parity with the dollar or even lower this year.
In Asia, sentiment was subdued, with Chinese equities the worst performers as data pointed to a slowing economy and traders looked ahead to potentially higher tariffs. MSCI Inc.’s gauge of Asian shares fell for the third day out of the past four. Financial markets in Japan remained closed.
Elsewhere in commodities, oil climbed after an industry report signaled US crude stockpiles continued to shrink. A report from the American Petroleum Institute showed inventories fell by 1.4 million barrels last week, which would be a sixth straight drop. Gold rose. Bitcoin extended its rally to a third day.
Key events this week:
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.5% as of 12:58 p.m. New York time
The Nasdaq 100 fell 0.6%
The Dow Jones Industrial Average fell 0.5%
The MSCI World Index fell 0.4%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.9% to $1.0263
The British pound fell 1.2% to $1.2371
The Japanese yen fell 0.2% to 157.56 per dollar
Cryptocurrencies
Bitcoin rose 1.9% to $96,562.61
Ether rose 2.5% to $3,444.75
Bonds
The yield on 10-year Treasuries advanced one basis point to 4.58%
Germany’s 10-year yield advanced one basis point to 2.38%
Britain’s 10-year yield advanced three basis points to 4.59%
Commodities
West Texas Intermediate crude rose 2.3% to $73.36 a barrel
Spot gold rose 1.2% to $2,656.11 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Chiranjivi Chakraborty, Cecile Gutscher and John Viljoen.
