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The S&P 500 and Nasdaq Composite ended the first trading session of 2024 lower, weighed by Apple shares falling after a broker downgrade and declines among other big-tech names triggered by a move higher by Treasury yields. Canada’s main stock index also started 2024 with a negative session, pulled down by losses in technology and financial shares.

The lackluster session follows a year where Wall Street’s three major indexes notched double-digit gains on the back of optimism around artificial intelligence and stabilizing inflation. The S&P 500 ended last week within 1% of a record closing high reached in early 2022.

However, equities were pressured on Tuesday as U.S. and Canadian Treasury yields climbed, with the yield on U.S. 10-year notes ticking above 4.00% to a two-week high before easing slightly.

Such movement in Treasury yields reflected investors’ tempered expectations around cuts this year in U.S. interest rates. This, in turn, weighed on growth stocks - among them tech stocks - which would benefit from a more favorable rate environment.

Apple fell 3.6% after Barclays downgraded the tech giant to “underweight”, citing weakening iPhone demand. Other megacap stocks also declined, including Nvidia, Meta Platforms and Microsoft, which slipped between 1.4% and 2.7%.

“Everyone was very excited by the tail-end rally, the Fed - on the surface at least - paring back a little, and the fact we didn’t have a recession,” said Jason Pride, chief of investment strategy & research at Glenmede.

“But does that mean we’re out the woods yet? I suspect, even if the Fed brings rates down gradually, monetary policy is still tight and still likely to be a hindrance to overall economic activity.”

The Fed’s December policy meeting minutes and a slew of labour market data are on the roster for this week as market participants look to ascertain the timing of potential rate cuts.

While the Fed is widely seen holding rates at its January meeting, traders expect a near 70% chance of a 25-basis point cut in March, according to the CME Group’s FedWatch tool.

The Toronto Stock Exchange’s S&P/TSX composite index ended the Tuesday session down 86.3 points, or 0.4%, at 20,872.14.

“(We are) looking for a bit of choppy January as we had a pretty big move in bond yields higher and we’ll see if that sets the tone for the year,” said Greg Taylor, chief investment officer at Purpose Investments.

The TSX gained more than 8% in 2023 as optimism that the U.S. Federal Reserve and the Bank of Canada will soon start cutting interest rates offset the potential for slower economic growth.

Canada’s factory sector contracted in December at its steepest pace since the early months of the COVID-19 pandemic as the rising cost of manufactured goods crimped demand, data showed Tuesday.

The TSX technology sector fell 2.8%, with shares of e-commerce company Shopify Inc down 4.6%. Health care lost 1.5% and heavily-weighted financials ended 0.6% lower.

Energy was a bright spot, rising 0.5%, even as the price of oil settled 1.8% lower at US$70.38 a barrel.

The S&P 500 lost 27 points, or 0.57%, to end at 4,742.83 points, while the Nasdaq Composite lost 245.41 points, or 1.63%, to 14,765.94. The Dow Jones Industrial Average rose 25.5 points, or 0.07%, to 37,715.04.

The S&P 500 sectors were mixed. Healthcare was the brightest performer, with its 1.8% gain taking it to its highest close since mid-December 2022. Moderna’s 13.1% advance led the sector higher after the vaccine maker was upgraded by brokerage Oppenheimer, and it reiterated the company’s goal of achieving sales growth in 2025.

The energy index also rose 1.2% despite crude slipping on concerns about the economic outlook.

Information technology led decliners with a 2.6% fall, the index’s largest one-day drop since Aug. 2.

Tesla was flat despite saying it delivered a record number of electric vehicles in the fourth quarter, beating market estimates and meeting its 2023 target of 1.8 million vehicles.

Boeing dropped 3.4% after Goldman Sachs removed the aerospace company from its “conviction list”.

Meanwhile, Citigroup advanced 3.1% to $53.04, its highest finish since August 2022, after Wells Fargo raised its price target for the bank to US$70 from US$60. Wells analyst Mike Mayo also said Citi was his top pick among large banks in 2024, and he expects the stock to double to $100+ over the next three years.

Crypto-related stocks such as MicroStrategy gained as bitcoin pierced above $45,000 for the first time since April 2022 on optimism around the possible approval of exchange-traded spot bitcoin funds.

The volume on U.S. exchanges was 11.86 billion shares, compared with the 12.4 billion average over the last 20 trading days.

Reuters, Globe staff

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