The stock market experienced a significant downturn, with the three major indices all closing lowerThe Nasdaq and S&P 500 suffered losses exceeding 1%, reflecting a broader wave of investor pessimismThis marked the second-to-last trading day of the year, a time when many had hoped to see festive gains instead of retreatInvestors faced multiple pressures, including year-end tax implications, rising valuations, climbing treasury yields, and uncertainty looming over 2025.

By the close of trading, the Dow Jones Industrial Average had dropped by 418.48 points, or 0.97%, settling at 42,573.73 pointsThe Nasdaq composite dipped by 1.19%, ending at 19,486.78, while the S&P 500 index slid down by 1.07%, closing at 5,906.94. Adding to the gloom, the VIX index, which serves as a barometer for market volatility, climbed by 9.1% to 17.40, indicating heightened fear among investors.

On January 9, the United States will observe a national day of mourning in honor of former President Jimmy Carter, leading to the closure of major stock exchanges, including the New York Stock Exchange, Nasdaq, and Chicago Board Options Exchange.

In analyzing the financial landscape, it was noted that medium to long-term U.S

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treasury yields fell by more than 7 basis points, a shift that interrupted a three-day streak of rising ratesSpecifically, the 2-year treasury yield decreased by 7.2 basis points to 4.253%, while the benchmark 10-year yield dropped by 7.4 basis points to 4.546%. This reaction can primarily be attributed to investors adjusting their expectations around future U.Smonetary policies.

Since early December, the upsurge in U.Streasury yields has cast a long shadow over the stock market, potentially setting the stage for the toughest month for the major indices since AprilAnalysts anticipate that U.Spolicy changes could ignite inflationary pressures, and following the Federal Reserve's cautious stance in recent meetings, market expectations for a potential interest rate cut in 2025 have diminished significantlyTools such as the FedWatch provided by the Chicago Mercantile Exchange suggest that traders expect the first rate cut to occur in May of next year.

“Investors are eagerly watching for two major events next year: whether U.S

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policies will stimulate growth and whether the Federal Reserve will maintain its tendency to inject liquidity into the system,” remarked Shahan, CEO of investment firm 50 Park Investments“Since the last Federal Reserve meeting, equities have been on a decline due to concerns that the Fed might adopt a more hawkish rather than a dovish approach.”

This downturn, however, is somewhat atypicalHistorically, the stock market tends to rally during the last five trading days of December, alongside the first two days of January, in a phenomenon popularly referred to as the "Santa Claus Rally." According to the Stock Trader's Almanac, since 1969, the S&P 500 has averaged a 1.3% increase during this period.

Bosh, Senior Vice President at Wealthspire Advisors, noted that despite the recent sell-offs, the S&P index has soared over 50% in the past two years, suggesting that investors might want to secure some of those gains

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“When trading volumes are low, it doesn't take much to move the market,” he added, highlighting the delicate balance between risk and reward in the current investment climate.

On an individual stock basis, Boeing saw a decline of 1.6% following a catastrophic aviation incident in South Korea involving one of its aircraft, prompting an emergency safety inspection of the airline's entire operation.

Other tech giants also reported disappointing performancesWhile Nvidia managed a slight increase of 0.4%, major players like Apple, Microsoft, Meta, and Amazon all experienced declines of over 1%. Tesla was notably the hardest hit, tumbling 3.3% amid concerns regarding its production rates and market demand.

In the cryptocurrency market, volatility surrounding Bitcoin led to losses for numerous companies, including MicroStrategy, Coinbase, and Marathon Digital Holdings, all of which fell by over 3%. The Nasdaq Golden Dragon China Index, which tracks Chinese technology stocks listed in the U.S., also faced a setback, declining by 1.8%.

Turning our attention to economic indicators, a report from the National Association of Realtors indicated that existing-home sales rose by 2.2% in November to an index of 79.0, marking the highest level since February 2023. This manuscript of growth occurred despite rising mortgage rates, as buyers sought to capitalize on improved inventory levels

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Lawrence Yun, Chief Economist of NAR, noted that consumers seemed to have recalibrated their expectations regarding mortgage rates, which have averaged above 6% in the past 24 months“Buyers are no longer waiting or anticipating significant drops in mortgage ratesAdditionally, as the market shifts from a seller's to a buyer's market, purchasers find themselves in a better negotiating position,” he explained.

The Institute for Supply Management's Chicago Purchasing Managers' Index (PMI) fell sharply from November's 40.2 to December's 36.9, signaling contraction in the manufacturing sectorConversely, the Dallas Fed Manufacturing Index unexpectedly returned to the expansion zone, rising from -2.7 in November to 3.4 in December, defying predictions of a further decline to -3.0. This divergence contrasted sharply with recent reports from the Philadelphia Fed, Kansas Fed, and S&P Global's manufacturing PMI surveys.

In the commodities market, international oil prices ticked slightly higher, with attention focused on the effects of winter weather on demand