Wall Street lost ground on Tuesday as investors closed the book on a remarkable year for equities, during which the stock market was powered to record highs by the twin engines of the artificial-intelligence boom and the Federal Reserve’s first interest rate cuts in three-and-a-half years.
The Dow Jones Industrial Average fell 29.51 points, or 0.1%, to close at 42,544.22. The S&P 500 and the Nasdaq slumped 0.4% and 0.9%, respectively. The blue chip index finished the year with a gain of nearly 13%.
For 2024, the Nasdaq posted a 29% gain, while the bellwether S&P 500 notched a 23% gain, the index’s best two-year run since 1997-1998.
2024 included intensifying geopolitical strife, a presidential election and shifting speculation regarding the path of Fed policy in the coming year.
Among the 11 major sectors of the S&P 500, technology shares suffered the largest percentage loss on the day, while energy stocks led the gainers.
“There’s no Santa Claus rally this week, but investors received the gift of gains in 2024,” said Greg Bassuk, chief executive officer at AXS Investments in New York. “2024 was a massive year for equity gains driven by a trifecta of the AI explosion, a slew of Fed interest rate cuts and a robust US economy.”
“It sets the stage for continued strength heading into 2025,” Bassuk added.
For the fourth quarter, the Nasdaq jumped more than 6%, while the S&P 500 rose nearly 2%. The Dow was barely positive for the October-December period.
Among the 11 major sectors of the S&P 500, communication services, technology and consumer discretionary were the big percentage gainers, jumping 30% to 40% in the year.
Healthcare, real estate and energy are the only sectors set to register just single-digit gains, while the materials sector is the sole 2024 decliner, dropping nearly 2%.
Looking ahead to 2025, financial markets are now pricing in about 50 basis points of additional interest rate cuts from the Fed, with investors eying stretched valuations and uncertainties surrounding tax and tariff policies from the administration of President-elect Donald Trump.
“Investors should be cautious regarding the impact of the incoming Trump administration and how that affects certain sectors,” Bassuk said, adding that “the instability driven by geopolitics, specifically the Russia/Ukraine war and continued strife in the Middle East could trigger consternation” in companies and sectors with ties to the affected regions.
And Bassuk believes the AI boom still has room to grow.
“Valuations have become lofty amid the stock run up, but because we believe that the growth in AI is set to continue and move beyond hardware to software in a massive way across most sectors,” he added.
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