The recent trend in the U.Sstock market has been rather concerning as all three major indices faced significant downturnsThe tech-heavy Nasdaq and the widely followed S&P 500 both plunged by over 1%, signaling growing apprehension among investors as December draws to a closeThis downward movement can be primarily attributed to several factors, including impending year-end tax considerations, elevated valuations, rising treasury yields, and the looming uncertainties surrounding the projections for 2025.

By the end of trading, the Dow Jones Industrial Average closed down 418.48 points, a decline of 0.97%, landing at 42,573.73. The Nasdaq Composite dropped 1.19%, settling at 19,486.78, while the S&P 500 decreased by 1.07% ending at 5,906.94. Meanwhile, the Chicago Board Options Exchange's Volatility Index (VIX) surged by 9.1%, reaching 17.40, indicating heightened market anxiety.

In an unusual twist, trading will be halted on January 9, Thursday, in observance of a national day of mourning for former President Carter, affecting major exchanges like the New York Stock Exchange and Nasdaq

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This was a notable interruption in the trading routine at a time when markets are typically bustling with activity.

On the bond market front, there was a marked decline in medium to long-term U.Streasury yields, which fell more than seven basis points, snapping a three-day streak of increasesThe two-year treasury yield, closely linked to interest rate expectations, eased 7.2 basis points to 4.253%, and the benchmark ten-year yield dipped 7.4 basis points to 4.546%. Since early December, rising treasury yields have placed continuous pressure on the stock markets, and analysts predict that the forthcoming month could be one of the toughest periods for the major indices, marking their worst performance since April.

Market fears are compounded by expectations that policies proposed by the president-elect could spur inflation, which, coupled with a cautious approach taken by the Federal Reserve in its recent meetings, has contributed to a diminishment in forecasts for interest rate cuts in 2025. According to the FedWatch tool from the Chicago Mercantile Exchange, traders forecast that the first rate cut will not materialize until May of next year.

Adam Sarhan, CEO of the investment firm 50 Park Investments, highlighted the dual focal points for investors as they navigate this turbulent market

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He stated the pressing questions: “Will the policies bolster growth, and will the Federal Reserve persist in injecting liquidity into the system?” He noted that since the last Fed meeting, market downturns have ensued, driven by concerns that the Fed might adopt a more hawkish stance rather than a dovish one.

This recent downturn is somewhat atypical since historical data suggests that U.Sstocks generally outperform in the final trading days of December into early January, a phenomenon often referred to as the “Santa Claus Rally.” Data from the Stock Trader's Almanac indicates that, since 1969, the S&P 500 has entered a favorable trend, averaging an increase of about 1.3% during this period.

Despite the recent sell-off, Oliver Pursche, a senior vice president at Wealthspire Advisors, pointed out that the S&P index has rallied over 50% in the past two years

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He suggested that it might be prudent for investors to consider offloading some positions to safeguard their gains, asserting, “When trading volumes are low, it does not take a lot to move the market.”

Looking at individual stocks, Boeing shares fell by 1.6%. This dip followed a catastrophic accident involving a Boeing aircraft in South Korea, prompting an immediate emergency safety inspection of the entire airline operation system in the countryThis incident has raised serious concerns regarding Boeing's safety protocols and regulatory compliance.

Leading tech stocks also seemed impacted by the market's bearish turn; Nvidia gained a modest 0.4%, whereas tech giants such as Apple, Microsoft, Meta, and Amazon saw declines of more than 1%, while Tesla shares plunged 3.3%. The extended volatility in the tech sector has left many investors questioning the sustainability of valuations in an environment marked by rising interest rates and decreasing consumer spending.

The cryptocurrency market exhibited weakness as well, primarily driven by fluctuations in Bitcoin's value, leading to significant dips in shares of MicroStrategy, Coinbase, and MARA Holdings, all down over 3%. The ongoing volatility in cryptocurrency prices continues to serve as a reminder of the speculative nature of digital assets.

The Nasdaq Golden Dragon China Index also faced a downturn, dropping 1.8%, highlighting the ongoing pressures felt in the Chinese markets as traders remain cautious amid geopolitical tensions and regulatory changes.

In terms of economic indicators, the National Association of Realtors (NAR) reported on Monday that the existing home sales index for November experienced a modest boost of 2.2%, reaching 79.0, which is the highest level since February 2023. This rise marks the fourth consecutive month of gains as buyers have begun to navigate elevated mortgage rates, taking advantage of improved inventory levels

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Lawrence Yun, NAR Chief Economist, noted that consumers appear to have recalibrated their expectations regarding mortgage rates, thus leveraging more available stock in the marketHe stated, “Mortgage rates have averaged above 6% for the past 24 monthsBuyers are no longer waiting or expecting a significant drop in mortgage ratesAdditionally, as the market transitions from a seller's market, buyers find themselves in a stronger negotiating position.”

Conversely, the Institute for Supply Management's (ISM) Chicago Purchasing Managers' Index (PMI) fell sharply from November's reading of 40.2 to December's 36.9, indicating a contraction in manufacturing activityThis downturn aligns with market expectations that have continued to fluctuate amidst broader economic uncertainties.

Moreover, the Dallas Federal Reserve's manufacturing index surprisingly returned to expansion territory, rising from -2.7 in November to 3.4 against market anticipation of -3.0. This result contradicted earlier data released by both the Philadelphia and Kansas City Federal Reserves and the S&P Global U.S