Nasdaq logs longest losing streak in over a year, S&P 500 falls for a fourth day to extend the dismal 2024 start

What drove markets

After finishing off 2023 with a nine-week winning streak, U.S. stocks have been off to a rocky start in the new year. Dow industrials eked out a modest gain on Thursday, stemming losses from earlier this week.

But the Nasdaq Composite still ended in the red, logging its longest losing streak in over a year after briefly turning positive in the morning session, according to Dow Jones Market Data.

Heightened Middle East tensions, concerns that stocks and bonds have become overbought, and worries that the Federal Reserve may not reduce borrowing costs as quickly as hoped have all been blamed for driving the selloff.

Indeed, minutes from the Fed’s December meeting released Wednesday showed officials welcomed waning inflation but expressed some uncertainty about the path of monetary policy in 2024.

James St. Aubin, chief investment officer at Sierra Mutual Funds, dismissed the notion that the minutes materially impacted investors’ expectations regarding the Fed. “I don’t think there was anything in there that changed the market’s mind,” he said.

Financial markets still largely expect five to seven quarter-point rate cuts from the central bank this year, compared with just three cuts as policymakers telegraphed last month.

Fed-funds futures traders Thursday saw a 93.3% chance of the Fed leaving its benchmark rate between 5.25% and 5.5% at its next meeting on Jan. 30-31, according to the CME FedWatch Tool. In addition, the chance of at least a 25-basis-point rate cut by March was at 62.1%, down from 90.3% a week ago.

Brad Conger, deputy chief investment officer at Hirtle Callaghan & Co, described the amount of interest-rate cuts the Fed has forecast as “very conservative.” Even though there may not be as many as seven cuts as the market expected by the end of 2024, “five or six is very justified” as economic data over the past few months has proven convincing in terms of disinflation, he told MarketWatch on Thursday.

“I don’t think the market assumptions of Fed rate cuts are exaggerated by too much,” Conger said.

St. Aubin said there could be tax purposes factoring into the selloff. “I don’t know that there’s a particular catalyst for it, other than perhaps you’re entering a period of selling after the new year for tax purposes,” he told MarketWatch via phone.

See: Holiday hiring boom or bust? December jobs report to tell us.

There looks to be no shortage of potentially market-moving news arriving in the coming weeks, including the start of earnings-reporting season for the final three months of 2023.

But more immediately in focus is the U.S. labor market, with the government’s nonfarm-payrolls report due out Friday at 8 a.m. Eastern.

Investors have already received a batch of labor-market data this week. On Thursday, private-payrolls data from ADP showed U.S. businesses added a solid 164,0,000 new jobs in December. Meanwhile, U.S. government data showed the number of Americans who applied for unemployment benefits in the final week of 2023 fell to a nearly three-month low of 202,000.

A report on job openings released earlier in the week showed the number of open positions had fallen to a 32-month low of 8.8 million as of November, the latest data available.

Companies in focus

• Mobileye Global Inc.
  MBLY,
  -1.07%
  finished 24.6% lower on Thursday after the creator of self-driving technology issued a revenue warning. Bank of America also downgraded the Israel-based company to an underperform rating.

• Walgreens Boots Alliance
  WBA,
  +1.13%
  shares fell 5.1% after the drugstore chain reported first-quarter earnings that surpassed expectations, but cut its quarterly dividend by 48%.

• Apple Inc.
  AAPL,
  -0.01%
  shares were down 1.3% after another Wall Street downgrade. Piper Sandler lowered its rating on the technology stock to neutral from overweight, citing concerns about valuation as well as pressures in the smartphone market.

Jamie Chisholm contributed.