It appears the “everything rally” is starting to slow down as the stock market sees its first losing day of the new year. Why are stocks down today?
Well, it appears traders are showing a bit of hesitance following the gangbuster fourth quarter of 2023. Indeed, the S&P 500 closed down by about 0.5% today while the Nasdaq Composite saw a 1.6% drop. On whole, the stock market saw its worst day since October.
It’s unclear exactly what fueled the selloff, although it’s possible today’s downtick is a technical movement resulting from the recent strength in stocks. Indeed, the market was on fire the last few weeks of 2023, with both the Nasdaq and S&P flirting with new all-time highs.
Not for nothing, investors were pushed into a frenzy after Federal Reserve Chair Jerome Powell hinted at at least three rate cuts to come in 2024. As a reminder, when interest rates fall, economic growth tends to increase — typically a net positive for the stock market.
According to Infrastructure Capital Management Chief Executive Jay Hatfield, today’s reversal is fairly par for the course. “This is perfectly normal, somewhat expected activities,” he told CNBC. “It’s a normal seasonal pattern that you have tax loss selling in the period before year-end, and then you have gain harvesting in the period after.”
Why Are Stocks Down Today?
Apple (NASDAQ:AAPL) is leading today’s pullback after Barclays downgraded the iPhone maker to an “underweight” rating. According to Barclays, Apple may shed as much as 17% of its value this year due to slowing iPhone sales.
The tech giant closed down by 3.5% today, logging its first drop of the new year after climbing more than 48% in 2023. Fellow tech stocks Nvidia (NASDAQ:NVDA) and Microsoft (NASDAQ:MSFT) also closed down today, in the red 2.7% and 1.4%, respectively.
Some may read today’s stock market pullback as especially ominous, given that it’s the first day of the new year. That’s because many investors often look to the first seven or so trading sessions of the year to serve as a bellwether for the entire year. It’s not a perfect predictor, but it does tend to hold true more often than not.
As such, traders will be looking for the rest of the week to show a bit more promise as it pertains to stocks.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
