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US indices retreat on last day of 2024
US stocks turned from the green zone at the start of trading on Tuesday, December 31, to the “red zone”, as investors look to close out another prosperous year, with the S&P 500’s annual gains for the second year in a row exceeding 20%, driven by enthusiasm for lower interest rates, a strong economy and the momentum of artificial intelligence.
The past two-year gain of 53.9% is the best since a surge of about 66% in 1997 and 1998.
The enthusiasm surrounding artificial intelligence and the potential for increased productivity has led to big gains for the major indexes throughout the year, pushing shares of the “big seven” companies such as AI chip favorite Nvidia and giant Apple to new highs.
Stocks also benefited from the Federal Reserve starting to cut interest rates following one of the most aggressive rate-hiking cycles in modern history, which has spurred hopes for a period of economic growth with lower borrowing costs.
Since September, the Fed has cut interest rates by 100 basis points. Although more rate cuts are expected in the new year, the Fed’s pace may slow from initial expectations.
Donald Trump’s expected return to the White House has also fueled hopes for deregulation, lower corporate tax rates and a focus on the U.S. economy, which has remained resilient.
The Nasdaq and S&P 500 are up 7.1% and 2.5%, respectively, this quarter, both on track for their fifth straight positive quarter since 2021. The Dow Jones is up just 0.6% over the same period, its fourth positive quarter.
