By Damian J. Troise, The Associated Press on December 29, 2023.
NEW YORK (AP) – Stocks slipped on the final trading day of the year, which nonetheless boasted surprisingly robust gains for Wall Street. The benchmark S&P 500 index inched lower Friday but ended 2023 with a 24.2% gain for the year. The Dow Jones Industrial Average rose more than 13% this year. The Nasdaq soared 43% for the year, driven by gains in big technology companies, including Nvidia, Amazon and Microsoft. Treasury yields were mixed and crude oil prices were relatively stable.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
Stocks slipped on the final day of trading for 2023 in what has been a surprisingly strong year of gains on Wall Street.
Yet the so-called Magnificent 7 companies – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla – accounted for about two-thirds of the gains in the S&P 500 this year, according to S&P Dow Jones Indices. Nvidia leads the group with a gain of about 240%.
The S&P 500 index fell 0.3% Friday and is sitting just below the all-time high it set in January of 2022. It is up 24.2% for the year after giving up 19% in 2022.
The Dow Jones Industrial Average fell 60 points, or 0.2%, to 37,651, a day after hitting another record. It is up more than 13% for the year after shedding 8.8% last year.
The tech-heavy Nasdaq fell 0.5% as of 2:12 p.m. Eastern and is up 43% for the year thanks largely to the movement of those marquee companies. The index fell 33% in 2022.
Smaller company stocks had a late rally, but managed to erase the bulk of their losses from last year. The Russell 2000 index is up 15.5% in 2023 after falling 21.6% in 2022.
The rally that started in November helped broaden the gains within the market beyond just the big technology companies. It marked a big psychological shift for investors, said Quincy Krosby, chief global strategist at LPL Financial.
“Investors were able to accept that fact that the market would close the year on a higher note,” Krosby said. “Above all else, it was broad participation in the market that reinforced and confirmed gains for smaller company stocks were particularly important.”
Shares in European markets edged higher Friday, also after a year of gains. Benchmark indexes in France and Germany made double-digit advances, while Britain’s has climbed just under 4%.
Asian markets had a mixed session on the last trading day of the year for most markets. Tokyo’s Nikkei 225 gave up 0.2% to 33,464.17. It gained 27% in 2023, its best year in a decade as the Japanese central bank inched toward ending its longstanding ultra-lax monetary policy after inflation finally exceeded its target of about 2%.
The Hang Seng index in Hong Kong ended flat, while the Shanghai Composite index gained 0.7%. The Shanghai index lost about 3% this year and the Hang Seng fell nearly 14%. Weakness in the property sector and in global demand for China’s exports, as well as high debt levels and wavering consumer confidence have weighed on the country’s economy and the stock market.
All the major indexes were holding on to slight weekly gains, with the S&P 500 on track for a rare ninth consecutive week of gains.
Investors in the U.S. came into the year expecting inflation to ease further as the Federal Reserve pushed interest rates higher. The trade-off would be a weaker economy and possibly a recession. But while inflation has come down to around 3%, the economy has chugged along thanks to solid consumer spending and a healthy job market.
The stock market is now betting the Fed can achieve a “soft landing,” where the economy slows just enough to snuff out high inflation, but not so much that it falls into a recession. As a result, investors now expect the Fed to begin cutting rates as early as March.
The Fed has signaled three quarter-point cuts to the benchmark rate next year. That rate is currently sitting at its highest level, between 5.25% and 5.50%, in two decades.
That could add more fuel to the broader market’s momentum in 2024. High interest rates and Treasury yields hurt prices for investments, so a continued reversal means more relief from that pressure. Wall Street is forecasting stronger earnings growth for companies next year after a largely lackluster 2023, with companies wrestling with higher input and labor costs and a shift in consumer spending.
The yield on the 10-year Treasury was at 3.88% Friday from 3.85% late Thursday. It surpassed 5.00% in October, but has been generally falling since then, easing the pressure on stocks.
The yield on The two-year Treasury, which more closely tracks expectations for the Fed, fell to 4.25% from 4.28% from late Thursday. It also surpassed 5% in October.
U.S. and international crude oil prices were relatively stable on Friday. The price of oil tumbled by more than 10% this year, defying predictions from some experts that it could cross $100 per barrel.
Despite production cuts from OPEC, a war involving energy exporter Russia and another in the Middle East, U.S. benchmark crude dropped nearly 11% in 2023, and a whopping 21% in the final three months of the year.
Increased production in the U.S., now the top oil producer in the world, as well as Canada, Brazil and Guyana offset the reduced output from OPEC. Not all OPEC members participated in the cuts and some countries like Iran and Venezuela are pumping more oil, energy analysts say.
Charles Sheehan contributed to this report.