Stocks Close Lower as Investors Wrap Up a Stellar Year for the Markets

What Happened?

Stocks closed out the year slightly lower on Tuesday, ending 2024 on a mixed note.

This is despite a robust year in the market that saw the S&P 500 pushed to its second consecutive annual gain exceeding 20%. Buoyed by optimism around rate cuts, economic strength, and advancements in artificial intelligence, markets achieved historic growth.

The S&P 500 dropped 0.43% on the year’s final trading day, closing at 5,881.63. The Nasdaq Composite fell 0.9% to 19,310.79, while the Dow Jones Industrial Average slipped a marginal 0.07%, or 29.51 points, to settle at 42,544.22.

In 2024, the S&P 500 surged 23.31%, following a 24.2% gain in 2023. The cumulative two-year rally of 53% is the best since the late 1990s. The Nasdaq outpaced other indices, rising 28.64% for the year, while the Dow advanced 12.88%.

Why it Matters

The year was defined by soaring enthusiasm for artificial intelligence. Companies like Nvidia and Apple, key players in the ‘Magnificent 7,’ achieved significant gains. They climbed 171% and 30%, respectively.

AI-driven optimism set the stage for record highs across the major indices.

Policy shifts and political developments further bolstered market sentiment. The Federal Reserve cut its benchmark interest rate by a full percentage point starting in September, fueling hopes for sustained economic growth.

Stocks rallied sharply in November after President-elect Donald Trump’s victory, which raised expectations of lower taxes and deregulation under his administration.

Bank stocks performed especially well following the election. JPMorgan and Goldman Sachs saw year-to-date gains of 41% and 48%, respectively. Tesla, led by Trump ally Elon Musk, soared 62% in 2024.

Bitcoin also made headlines, skyrocketing 119% to surpass the $100,000 mark for the first time.

According to Yung-Yu Ma, chief investment officer at BMO Wealth Management, ‘Developments like inflation slowing, aggressive rate cuts from the Fed, and solid earnings growth combined to drive market enthusiasm this year.’

The final quarter of 2024 capped a strong year for Wall Street. The S&P 500 and Nasdaq gained 2.1% and 6.2%, respectively, marking five consecutive positive quarters for the first time since 2021. The Dow added 0.5% in the fourth quarter, securing its fourth positive quarter in five.

However, the markets faced challenges in December as investors locked in profits from the year’s top performers. The S&P 500 declined 2.5% for the month, while the Dow fell 5.3%. The Nasdaq managed a modest 0.5% gain.

How it Affects You

Investors had hoped for a Santa Claus rally, a seasonal trend of market gains in late December and early January.

Instead, the S&P closed the year with four straight down days, the first such occurrence since 1966. Both Apple and Nvidia fell on Friday, rounding out a volatile end to an otherwise remarkable year.

Looking ahead, Ma noted concerns over valuation and future catalysts, adding, ‘At the end of the year, it’s natural to see people locking in profits. The next move higher will need a clear driver.’