December 26 (Reuters) — The Dow Jones Industrial Average rose slightly on Thursday, extending its winning streak to five consecutive sessions. The market’s positive movement came amid light trading volumes and rising U.S. Treasury yields, which put pressure on major technology stocks.
In contrast, the Nasdaq Composite and the S&P 500 closed mostly flat, ending slightly in the red. This marked the end of the Nasdaq’s four-day winning streak and halted the S&P 500’s three-day rally.
Treasury Yields Impact Technology Stocks
On a relatively quiet trading day, investors focused on rising U.S. government bond yields, particularly the yield on the benchmark 10-year Treasury note. The yield reached 4.64% during the session—its highest level since May—before retreating slightly after a strong auction of seven-year Treasury notes. By late afternoon, the 10-year yield stood at 4.58%.
Higher yields typically dampen investor interest in growth stocks, as they increase the cost of borrowing for companies. As technology stocks, especially those from the “Magnificent Seven” group, have dominated the market in recent months, any slowdown in their performance could negatively impact major indexes.
Dow Ends Higher, but Nasdaq and S&P 500 Slip
Dow Jones Industrial Average: Rose by 28.77 points (0.07%) to close at 43,325.80.
Nasdaq Composite: Dropped 10.77 points (0.05%) to finish at 20,020.36.
S&P 500: Fell 2.45 points (0.04%) to close at 6,037.59.
Of the seven largest technology companies, six saw declines. Tesla (TSLA) led the drop with a 1.8% decrease, while Apple (AAPL) was the exception, rising by 0.3%. Apple’s growth brings it closer to becoming the first company with a market value of $4 trillion.
Tech Sector Resumes Growth After Election
After a brief summer slowdown, technology stocks have regained momentum, particularly since the U.S. elections in November. This rally has outpaced the broader market, with the Magnificent Seven—Apple, Tesla, Microsoft, Google, Amazon, Nvidia, and Meta—driving much of the growth.
Adam Turnquist, chief technical strategist at LPL Financial, highlighted that the strong performance of these tech stocks shows “very constructive leadership” heading into the new year. “What you want to see is breakouts in absolute terms and relative terms, and the Mag 7 is checking the boxes there,” he said.
Investors Eye Interest Rates and Economic Data
While major U.S. indexes have reached multiple record highs this year, driven by hopes for lower interest rates and artificial intelligence-driven corporate profits, the market has faced some turbulence in December. Investors are evaluating the Federal Reserve’s latest projections, which suggest fewer interest rate cuts in 2025 than previously expected.
Turnquist added that the reliance on the Magnificent Seven stocks to fuel market growth may be starting to show signs of slowing down. For the market to continue its upward trajectory, broader economic sectors will need to contribute more significantly.
Labor Market Data Shows Stability
A report released Thursday revealed that new applications for jobless benefits in the U.S. fell to the lowest level in a month, suggesting a cooling but still healthy labor market. This data may offer reassurance to investors looking for signs of economic stability.
Strong End-of-Year Market Momentum
Despite the recent volatility, the market is entering a historically strong period known as the “Santa Claus rally.” This pattern, often attributed to low liquidity, tax-loss harvesting, and the reinvestment of year-end bonuses, typically boosts stocks in the final days of December and the first few days of January.
According to the Stock Trader’s Almanac, the S&P 500 has averaged a gain of 1.3% during this period since 1969.
Bitcoin Decline Weighs on Cryptocurrency Stocks
Stocks related to cryptocurrency also faced pressure on Thursday. Bitcoin fell by 3.9%, leading to declines in stocks like MicroStrategy (MSTR), Marathon Digital Holdings (MARA), and Coinbase Global (COIN). These companies saw drops ranging from 1.9% to 4.8%.
Sectors to Watch
Among the 11 sectors of the S&P 500, consumer discretionary and energy were the biggest losers. The consumer discretionary sector fell by 0.6%, while the energy sector slipped 0.1% due to weakness in U.S. crude oil prices.
As the year draws to a close, investors will likely continue to keep an eye on bond yields, economic data, and the performance of key technology stocks, all of which will play a crucial role in shaping the direction of the market into 2024.
