Global stocks declined on Tuesday as rising U.S. Treasury yields weighed on markets, capping an otherwise strong year for equities with a subdued close.
On Wall Street, early gains faded as the tech sector fell 1.04%. Some of the top-performing stocks of the year, including Palantir Technologies (NASDAQ: PLTR), Vistra Corp, and Nvidia (NASDAQ: NVDA), ended the day lower as investors locked in profits. Despite the pullback, 2024 was a robust year for the markets, with the S&P 500 climbing 23.3% and the Nasdaq rising 28.7%.
The Dow Jones Industrial Average dipped 29.51 points, or 0.07%, to 42,544.22. The S&P 500 lost 25.31 points, or 0.43%, to close at 5,881.63, while the Nasdaq Composite dropped 175.99 points, or 0.90%, to 19,310.79.
U.S. equities have seen a strong surge this year, with the S&P 500 achieving its fifth annual gain in six years. The two-year increase of about 53.19% marks the strongest consecutive annual performance for the index since 1997-1998.
This rally was driven by optimism surrounding artificial intelligence, expectations of Federal Reserve interest rate cuts, and anticipation of deregulation policies from the incoming Trump administration.
However, bond yields have climbed following the Fed’s recent economic outlook and concerns that President-elect Donald Trump’s policies, including potential tariffs, might spur inflation. The 10-year U.S. Treasury yield reached 4.641% last week, its highest since May, contributing to a cooling of the rally.
“There’s no Santa Claus rally this week, but investors have enjoyed the gift of significant gains in 2024,” said Greg Bassuk, CEO of AXS Investments in New York.
“2024 was a remarkable year for equity markets, fueled by a powerful combination of the AI boom, multiple Federal Reserve interest rate cuts, and a resilient U.S. economy.”
SECOND STRAIGHT ANNUAL GAIN
The MSCI global stock index slipped 2.59 points, or 0.31%, to 841.24 on Tuesday. However, it remained on track for its second consecutive yearly gain, having surged nearly 16% in 2024.
In Europe, the STOXX 600 index edged up 0.51% but ended the session with its steepest quarterly drop in over two years. Despite this, it closed 2024 with a 5.99% annual gain.
Trading activity was light ahead of the New Year holiday on Wednesday. Stock markets in Germany, Italy, and Switzerland were closed, while those in the UK, Spain, and France had shortened trading sessions.
The yield on the benchmark U.S. 10-year Treasury note rose 2.8 basis points to 4.573%, reversing earlier declines but remaining above the 4.5% threshold that analysts consider challenging for equities. Over the year, the yield increased by about 69 basis points, including a sharp 74-basis-point surge in the fourth quarter.
The widening interest rate differentials have bolstered the dollar’s appeal throughout the year. The dollar index, which tracks the greenback against a basket of major currencies, gained 6.6% in 2024, with a 7.3% rise in the fourth quarter marking its largest quarterly increase since Q1 2015.
On Tuesday, the dollar index climbed 0.36% to 108.44. The euro fell 0.47% to $1.0358, ending the year down 6.1% against the dollar after a 6.5% decline in the fourth quarter. The dollar also strengthened 0.31% against the Japanese yen to 157.32, while the British pound slipped 0.28% to $1.2516.
U.S. crude oil prices rose 1.03% to settle at $71.72 per barrel, while Brent crude gained 0.88% to settle at $74.64 per barrel. Oil prices were supported by data showing growth in Chinese manufacturing, tempered by Nigeria’s plans to boost output next year. Despite Tuesday’s gains, oil prices were set to record their second consecutive year of declines in 2024.
