Written by Stephen Culp
NEW YORK (Reuters) – Wall Street fell on Tuesday as investors closed books on a banner year for stocks, with the U.S. stock market rising to record highs thanks to the twin drivers of the artificial intelligence boom and the U.S. Federal Reserve. The first interest rate cut in three and a half years.
All three major US stock indexes closed in negative territory, ending a weak, low-volume session that belied the turbulent year that preceded it.
2024 saw heightened geopolitical conflict, a US presidential election, and a shift in speculation regarding the course of Fed policy in the coming year.
“There's no Santa Claus rally this week, but investors received the gift of gains in 2024,” said Greg Bassuk, CEO of AXS Investments in New York. “2024 was a massive year for stock gains driven by the trifecta of the AI explosion, a slew of Fed rate cuts and a strong US economy.”
“It paves the way for the force to continue until 2025,” Basuk added.
For 2024, the Nasdaq is up 28.6%, while the benchmark has gained 23.3%, representing the index's best two-year performance since 1997-98.
The blue-chip Dow Jones index has advanced 12.9% this year.
Of the 11 major sectors in the S&P 500, communications services, technology and consumer discretionary were the biggest gainers in 2024, jumping between 29.1% and 38.9% over the year.
Healthcare, real estate and energy were the only sectors to post single-digit gains, while the materials sector was the only loser in 2024, falling almost 1.8%.
In the fourth quarter, the Nasdaq jumped 6.2%, while the S&P 500 advanced 2.1%. The Dow gained 0.5% from October to December.
The broader Standard & Poor's 500 index fell 25.31 points, or 0.43%, to 5,881.63 points, and the index lost 175.99 points, or 0.90%, to 19,310.79 points.
Looking ahead to 2025, financial markets are now pricing in about 50 basis points of additional interest rate cuts from the Federal Reserve, as investors eye extended valuations and uncertainties surrounding tax and tariff policies from the administration of President-elect Donald Trump.
“Investors should be cautious regarding the impact of the incoming Trump administration and how that impacts certain sectors,” Basuk said, adding that “instability caused by geopolitics, specifically the war between Russia and Ukraine and the ongoing conflict in the Middle East could spark panic.” In companies and sectors associated with the affected areas.
Basuk believes the AI boom still has room to grow.
“Valuations have become elevated amid rising stocks, but because we believe the growth in AI is set to continue and move from hardware to software in a massive way in most sectors,” he added.
Advancing issues outnumbered declining stocks 1.3 to 1 on the New York Stock Exchange. There were 52 new highs and 125 new lows on the NYSE.
On the Nasdaq, 2,013 stocks rose and 2,336 declined, with declining issues outnumbering rising ones by a ratio of 1.16 to 1.
The S&P 500 recorded two new 52-week highs and one new low while the Nasdaq Composite recorded 43 new highs and 71 new lows.
Trading volume on US stock exchanges reached 14.59 billion shares, compared to an average of 14.81 billion for the full session during the last 20 trading days.
