Markets Are Reopened After Christmas, Causing Stock Futures to Fall

Major U.S. stock indexes edged lower during their first trading session following Christmas, while the recent selloff in the bond market gained further momentum.

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On Thursday morning, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite each declined by less than 0.5%. Despite this dip, equities remain on track for strong annual gains with only four trading days left in 2024, including Thursday. This resilience comes even as the Federal Reserve's rate cuts fell short of earlier investor expectations, underscoring the ongoing challenge of reducing inflation to the Fed’s 2% target.

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As of the early close on Tuesday for Christmas Eve, the Dow had advanced approximately 15% in 2024, the S&P 500 surged by 27%, and the Nasdaq Composite led the pack with a 33% gain, driven by optimism around artificial intelligence innovations.

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In economic data, figures released Thursday showed a slight decline in initial unemployment claims. For the week ending Dec. 21, new claims totaled 219,000, down from 220,000 the previous week and below the 225,000 projected by economists surveyed by The Wall Street Journal. This continues to indicate a strong labor market, despite concerns over higher interest rates and their potential impact on economic growth.

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The bond market also attracted attention as the 10-year Treasury yield climbed to 4.63%, according to Tradeweb. This marked its highest level in several months, reflecting rising yields as bond prices dropped. Earlier in the year, yields peaked above 4.7% in April before retreating by over a percentage point in September. However, a rebound began soon after, with rates steadily climbing once more.

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Global equity markets presented a mixed picture. Japan’s Nikkei 225 index rose by 1.1%, fueled by strong performances from major automakers like Nissan Motor, Mitsubishi Motors, and Toyota Motor, each of which posted gains exceeding 6%. This brought the Nikkei’s year-to-date increase to over 18%. Meanwhile, the Japanese yen weakened further, trading just below 157.9 per dollar. A softer yen tends to benefit Japan’s export-heavy industries, particularly its sizable automotive sector.

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In China, the Shanghai Composite managed a modest 0.1% increase, while South Korea’s Kospi index edged lower. Several key international markets, including London, Frankfurt, Hong Kong, and Paris, were closed for the holiday season.

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Elsewhere, Turkey's central bank made a significant move by cutting its benchmark one-week repo rate to 47.5%, the first such reduction in over two years. This suggests that Turkish policymakers believe they are making headway in combating the country’s persistently high inflation.

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Turning to cryptocurrencies, Bitcoin retreated after nearing the $100,000 milestone in trading on Christmas Day, falling to approximately $95,700 based on the CoinDesk Bitcoin Price Index. Earlier in the week, the cryptocurrency had received a boost when MicroStrategy announced plans to seek shareholder approval to significantly increase its authorized share count.

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This move aims to facilitate future fundraising efforts, including an accelerated $42 billion Bitcoin purchasing initiative. Despite this ambitious announcement, MicroStrategy's stock fell by 2.7% during morning trading on Thursday, giving back some of the nearly 8% gain it recorded in the prior session.

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As markets head toward the year’s end, investors are weighing strong annual performances in equities against challenges posed by high interest rates, volatile bond markets, and persistent inflation concerns. Globally, differing economic conditions and policy actions continue to shape market movements, while the rise and pullback of Bitcoin highlight the ongoing volatility in digital asset markets.

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