Stock market today: Most Asian stocks fell after US equities declined

Stock market today, most Asian stocks fell on Monday in light holiday trading, following losses in the tech sector that dampened the usual year-end boost on Wall Street last week.

Mixed Market Reactions in Asia Amid Unrest

In Asia, South Korea’s Kospi rose by 0.6% to reach 2,418.80. However, shares of Jeju Air Co. fell 8.8% after one of the company’s jets skidded off the runway, crashed into a concrete fence, and caught fire on Sunday due to a failure of the landing gear. The incident resulted in the tragic loss of 179 lives.

Political unrest continued in South Korea, as law enforcement officials sought a court warrant on Monday to detain impeached President Yoon Suk Yeol. They are investigating whether his martial law decree issued on December 3 constituted rebellion.

Meanwhile, Tokyo’s Nikkei 225 index declined by 0.9% to 39,914.21 as the dollar strengthened against the Japanese yen, trading at 157.83 yen, up from 157.75 yen. The Tokyo market will conclude trading for 2024 with a year-end ceremony as Japan enters its New Year holidays, the country’s most significant festival.

S&P 500 and Tech Stocks Weigh Down Year-End Performance

On Friday, the S&P 500 dropped 1.1% to 5,970.84, with approximately 90% of the stocks in the index experiencing losses. Despite this decline, the index managed to maintain a modest weekly gain of 0.7%.

The Dow Jones Industrial Average decreased by 0.8% to 42,992.21, while the tech-heavy Nasdaq composite fell 1.5% to 19,722.03.

The downturn was exacerbated by significant losses among the major tech stocks known as the "Magnificent 7," which have a substantial impact on market direction due to their size.

Retailers also faced declines, with Amazon and Best Buy both falling 1.5%. This sector is being closely monitored for insights into performance during the holiday shopping season.

Prior to the Christmas break, the S&P 500 had gained nearly 3% over three days, although it posted a slight decline on Thursday.

Market Nears Strong Annual Finish Despite Recent Setbacks

Despite Friday's decline, the market is edging closer to another impressive annual finish. The S&P 500 is projected to gain around 25% in 2024, marking its second consecutive yearly increase of over 20%, a feat not seen since 1997-1998.

This growth has been fueled in part by positive economic indicators showing robust consumer spending and a strong labor market. While inflation remains elevated, it has been gradually easing.

A report released on Friday indicated a 0.2% decline in sales and inventory estimates for the wholesale trade sector in November, following a slight increase in October. This disappointing data follows a labor market update from Thursday, which revealed that unemployment benefits remained steady last week.

The combination of favorable economic data and easing inflation has led to a shift in the Federal Reserve's interest rate policy this year. Anticipations of interest rate cuts have also contributed to market gains, with the central bank recently implementing its third rate cut in 2024.

Although inflation is moving closer to the Fed's target of 2%, it remains persistently above that level, raising concerns about a potential resurgence and moderating expectations for further rate cuts.

Investor Sentiment Dims Amid US Rate Cut Concerns

Investor sentiment was weighed down by concerns over the pace of US interest rate cuts and the potential for higher import tariffs under incoming President Donald Trump.

"As US stock markets wrapped up with a decline on Friday, Asia-Pacific markets are preparing for a challenging penultimate trading day of 2024," noted Stephen Innes at SPI Asset Management.

"With US bond yields rising and liquidity effectively nonexistent, there's always a risk of significant market movements. This situation is exacerbated during the crucial year-end rebalancing period, particularly given the substantial equity positions in many portfolios," Innes added.

In Tokyo, the Nikkei fell 0.75% to 40,020.00 points on the final trading day before the market closes until January 6.

The yen remained relatively stable after dipping to 158.08 against the dollar on Thursday, its lowest level in nearly six months. This decline followed Bank of Japan Governor Kazuo Ueda's failure to provide a clear indication of a potential interest rate hike next month.

Conclusion:

Most Asian stocks experienced declines following the downturn in US equities. Investor concerns over the pace of interest rate cuts and potential trade tariffs under the incoming US administration contributed to the negative sentiment. As markets grapple with rising bond yields and low liquidity, volatility is expected to persist, particularly during this critical year-end rebalancing period. The Nikkei's drop in Tokyo and the yen's stability reflect broader regional trends. Moving forward, investors will be closely monitoring economic indicators and central bank signals to navigate potential market shifts in the new year.

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