By Medha Singh and Purvi Agarwal
(Reuters) – Wall Street's main indexes were weak on light trading volumes on Thursday as rising yields capped gains for stocks, while investors hoped for a year-end boost thanks to called Santa Claus rally.
US government bond yields inched higher across the board, with the yield on the benchmark 10-year Treasury note hitting its highest level since early May at 4.64%.
Among mega-cap stocks, amazon.com (O:) fell 0.8%, while Meta Platforms (O:) lost 1% after markets opened trading following the Christmas Day holiday.
Most S&P sectors fell, with consumer discretionary leading the losses after a 0.5% drop.
“We are now at an inflection point in Treasury yields, especially the 10-year… Any move higher tends to create weakness in the stock market,” said George Cipolloni, portfolio manager at Penn Mutual Asset Management.
At 11:27 a.m., they fell 24.18 points, or 0.06%, to 43,272.28, lost 7.09 points, or 0.12%, to 6,032.95, and lost 34.43 points, or 0.17%, to 19,997.26.
Markets in Europe, London and parts of Asia were closed on Thursday.
All three major indexes have hit multiple all-time highs this year on hopes of a lower interest rate environment and prospects of artificial intelligence boosting corporate profits.
However, U.S. stocks have hit a slump in the final month of the year following an election-led rally in November, as investors weigh the Federal Reserve's projection of fewer interest rate cuts in 2025.
The latest data showed that the number of Americans filing new claims for unemployment benefits fell last week to the lowest level in a month, consistent with a cooling but still healthy U.S. labor market.
“We have come out of a high interest rate policy and there is a good chance that we will continue to cut (rates) further. For next year, there should be a positive outlook (for the markets), unless we see signs that the data is softening,” said Joe Tigay, portfolio manager at the Rational (LON:) Equity Armor Fund.
Markets are in a seasonally strong period, called the “Santa Clause rally,” a pattern attributed to low liquidity, tax loss harvesting and year-end bond reversals.
The S&P 500 has gained an average of 1.3% in the last five trading days of December and the first two days of January since 1969, according to Stock Trader's Almanac.
The S&P 500 and Nasdaq closed Tuesday's truncated session with a third straight day of gains, boosted by mega-cap and growth stocks.
Cryptocurrency-related stocks fell after bitcoin fell 2.6%. MicroStrategy fell 4% and Coinbase Global (NASDAQ:) was down 2.2%.
Issues that rose exceeded those that fell by a ratio of 1.32 to 1 on the New York Stock Exchange and 1.35 to 1 on the Nasdaq.
The S&P 500 posted two new 52-week highs and one new low, while the Nasdaq Composite posted 38 new highs and 46 new lows.
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