LDN - Business

Wall St poised for dull start to 2024, Apple dips

[January 02, 2024] By Sruthi Shankar and Shristi Achar A

(Reuters) -U.S. stock index futures slipped on Tuesday, setting a somber tone for the first trading day of 2024, as Apple dipped on a broker downgrade and investors pondered if last year's big market gains could be sustained.

The three major U.S. stock indexes notched monthly, quarterly and annual gains on Friday as traders priced in higher chances of interest rate cuts from the Federal Reserve this year on the back of cooling inflation.

For 2023, the benchmark S&P 500, the tech-heavy Nasdaq and the blue-chip Dow posted double-digit gains. The S&P 500 wrapped up Friday within 1% of its record closing high reached on Jan. 3, 2022.

However, U.S. stock futures came under pressure on Tuesday, with the yield on 10-year U.S. Treasury notes, a benchmark for global borrowing costs, ticking above 4.0000% to a two-week high earlier in the session, before easing to 3.9594%.

Megacap stocks including Nvidia, Tesla and Alphabet lost between 0.7% and 1.1% in premarket trading. Apple fell 1.8% after Barclays downgraded the iPhone maker's stock to "underweight".

At 7:06 a.m. ET, Dow e-minis were down 196 points, or 0.52%, S&P 500 e-minis were down 33.75 points, or 0.7%, and Nasdaq 100 e-minis were down 173.25 points, or 1.02%.

Following a blockbuster 2023, boosted by optimism around artificial intelligence and stabilizing interest rates, more inflation data and looming presidential elections will put the prospect of further market gains to test.

S&P Global's final reading of U.S. manufacturing activity for December is due at 9:45 a.m. ET. Other economic data this week includes weekly jobless claims, monthly private and non-farm payrolls data as well as services sector data.

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People walk around the New York Stock Exchange in New York, U.S., December 29, 2023. REUTERS/Eduardo Munoz/File Photo

Market participants are also awaiting the Fed's December policy meeting minutes, scheduled for release on Wednesday, to ascertain the timing of the widely anticipated rate cuts.

"Should the minutes reveal that rate cuts were a main topic in policymakers' discussion, and should Friday's jobs data point to some further softness of the labor market, traders may be tempted to add to their rate cut bets," said Charalampos Pissouros, senior investment analyst at XM.

Traders see a near 90% chance of a pause in rate hikes in the January meeting, and an about 82% chance of at least a 25-basis point cut for the March meeting, according to the CME Group's FedWatch tool.

Stocks of companies linked to cryptocurrencies gained premarket.

Coinbase Global and MicroStrategy jumped 4.1% and 7.7%, respectively, as bitcoin stormed above $45,000 for the first time since April 2022 on optimism around the possible approval of exchange-traded spot bitcoin funds.

Energy majors such as Exxon Mobil and Chevron gained 0.8% and 1%, respectively, tracking a jump in crude prices after a naval clash in the Red Sea raised the chances of Middle East supply disruptions. [O/R]

Boeing shed 1.3% after Goldman Sachs removed the aerospace company from its "conviction list".

(Reporting by Sruthi Shankar and Shristi Achar A in Bengaluru; Editing by Devika Syamnath)

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