US equities experienced a broad decline on Tuesday, with the Dow Jones Industrial Average (DJI) enduring its most prolonged losing streak in 46 years.
The Dow concluded the session with a loss of approximately 0.6%, marking its ninth consecutive day in negative territory. This nine-day decline is the Dow’s longest losing streak since February 1978. Prior to this, the index suffered even longer losing streaks of 11 days in both 1974 and 1971. The other major indexes followed suit, with the S&P 500 (GSPC) retreating about 0.4% and the Nasdaq Composite (IXIC), after reaching a record high on Monday, dipping roughly 0.3%.
The Federal Reserve commenced its final policy meeting of the year on Tuesday. Market participants widely anticipate a 0.25% interest rate cut on Wednesday. However, many analysts believe this could be the last rate reduction for a considerable period due to persistent inflationary pressures. Consequently, attention is focused on indications regarding the future trajectory of interest rates, particularly in January.
Economic Data and Market Movers
Investors also scrutinized November’s retail sales figures to gauge consumer health and overall economic strength. Sales expanded by 0.7%, surpassing the 0.6% month-over-month growth forecast, driven by robust holiday spending.
Nvidia (NVDA), a prominent chip manufacturer, experienced a decline of more than 1% and remains down over 10% from its November peak. Concerns regarding a potential slowdown in AI spending and heightened competition contributed to the stock’s weakness.
Meanwhile, Bitcoin (BTC-USD) extended its recent rally, briefly surpassing $108,000 per token before retracing to slightly above $106,500.
Broader Market Trends and Outlook
The “Magnificent Seven” tech stocks, including Tesla, Alphabet, Amazon, and Apple, have demonstrated remarkable resilience. These companies either hit new record highs on Monday or remained near their peaks. This suggests a potential shift towards these mega-cap stocks as a defensive play amidst macroeconomic uncertainty.
Investor sentiment, according to the latest Bank of America Fund Manager Survey, is exceptionally bullish, with record levels of overweight positioning in US equities. Furthermore, concerns about a “hard landing” scenario for the economy have diminished significantly.
However, some analysts express caution, noting that widespread optimism often precedes market corrections. They point to cooling labor markets and underperforming homebuilder stocks as potential warning signs.
Tesla continued its upward momentum, approaching a market capitalization of $1.54 trillion. The electric vehicle manufacturer benefited from an upgrade by Mizuho, citing a more favorable regulatory environment under the incoming presidential administration.
In conclusion, the Dow’s historic losing streak underscores the prevailing uncertainty in the market as investors grapple with the implications of persistent inflation, potential shifts in Fed policy, and the evolving economic landscape. While sentiment remains broadly optimistic, cautionary voices highlight potential vulnerabilities in the current market rally. The performance of key sectors and individual stocks like Nvidia and Tesla will continue to be closely monitored as indicators of broader market trends.
