Wall Street's Rough Start to the Year Continues

Reports show US economy is cooling
By Newser Editors and Wire Services
Posted Jan 3, 2024 3:42 PM CST
Wall Street's Rough Start to the Year Continues
Traders work on the floor at the New York Stock Exchange in New York, Wednesday, Jan. 3, 2024.   (AP Photo/Seth Wenig)

Stocks fell again Wednesday as Wall Street's slow start to 2024 carried into a second day.

  • The S&P 500 fell 38.02 points, or 0.8%, to 4,704.81, though it remains within 2% of its record.
  • The Dow Jones Jones Industrial Average fell 284.85 points, or 0.8%, to 37,430.19.
  • The Nasdaq composite fell 173.73 points, or 1.2%, to 14,592.21.
Some of last year's biggest winners again weakened, including Tesla, which fell 4%. Treasury yields largely eased after reports showed a slowing economy, which economists hope will keep a lid on inflation but stop short of a recession.

The question hanging over the market is whether all the enthusiasm that helped stocks broadly rally for nine straight weeks into the start of this year was warranted, the AP reports. It was built on expectations that inflation has cooled enough for the Federal Reserve to not only halt its hikes to interest rates but to cut them several times this year. Hopes are also high the economy can escape a recession, even after the Fed hiked its main interest rate to the highest level since 2001. A couple of reports released Wednesday morning indicated the overall economy may indeed be slowing from its strong growth last summer, which the Federal Reserve hopes will keep a lid on inflation. A big danger is if it slows too much and begins shrinking.

One report showed US employers were advertising nearly 8.8 million job openings at the end of November, down slightly from the month before and the lowest number since early 2021. The report also showed slightly fewer workers quit their jobs during November. The Fed is looking for exactly such a cooldown, which it hopes will limit upward pressure on inflation without necessitating widespread layoffs across the economy. A second report from the Institute for Supply Management showed the US manufacturing industry is improving by a touch more than economists expected, but it's still contracting. Manufacturing has been one of the hardest-hit areas of the economy recently, while the job market and spending by US households have remained resilient.

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Treasury yields slumped immediately after the reports and then yo-yoed though the day. They swung again after the Federal Reserve released the minutes from its latest policy meeting. It was at that meeting in December that policy makers hinted their dramatic campaign to hike interest rates to get inflation under control may be over. The minutes from the meeting revealed "almost all participants" indicated a drop in rates would likely be appropriate this year. But they also said their forecasts were hampered by an "unusually elevated degree of uncertainty." Traders are betting the first cut to rates could happen in March, and they're putting a high probability on the Fed cutting its main interest rate by least 1.50 percentage points through the year, according to data from CME Group. (More stock market stories.)

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