On December 27, the final Friday of 2024 trading, US stocks fell sharply, during intraday trading, the S&P 500 index(SPX.US) down 1.4%, the Dow Jones Industrial Average(DJI.US) dropping over 420 points (1%), and the NASDAQ(IXIC.US) sliding 2%. Tech heavyweights like Tesla Motors, Inc.(TSLA.US) (-6.1%), NVIDIA Corporation(NVDA.US) (-3%), and Amazon.com, Inc.(AMZN.US) (-2.4%) led losses. The tech-focused Roundhill Magnificent Seven ETF(MAGS.US) dropped 3.3%. Meanwhile, 10-year Treasury yields hit 4.62%, nearing a seven-month high, exacerbating equity pressure.

Key Drivers:

Tech and Broader Sell-Offs:

• Major tech stocks, dubbed the "Magnificent Seven," led the declines, with Apple Inc.(AAPL.US) (-1.8%) retreating from record highs. Other sectors also faced selling, with S&P technology (-1.8%), consumer discretionary (-1.6%), and communication services (-1.2%) falling, while energy rose on higher oil prices.

Bond Market Impact:

• Rising 10-year Treasury yields are amplifying pressure on equities. The yield climbed amid fears of inflationary pressures tied to potential policy shifts and resilient US economic conditions.

Profit-Taking and Thin Liquidity:

• Holiday-season thin trading and profit-taking exacerbated volatility, with pension funds estimated to sell $210 billion in equities by year-end, reallocating to bonds.

Fed and Economic Data Concerns:

• Markets remain wary of January's employment and inflation data, which could influence the Fed's policy stance, keeping volatility elevated.

Analyst Perspectives:

• Tom Essaye (The Sevens Report): Bond yields serve as a key market anchor; rising rates heighten equity risks amid a lack of major news or data.
• Paul Hickey (Bespoke Investment Group): If yields breach 4.7%, equities may face greater pressure, mirroring April's market behavior.
• Scott Chronert (Citi): Views current volatility as temporary, advising buy-on-dip strategies for 2024, underpinned by favorable fundamentals.
• John Higgins (Capital Economics): Expects the S&P 500 to rise 16% by 2025, with steady corporate earnings and modest Treasury yield increases supporting gains.

Outlook:

While near-term volatility looms, most analysts remain optimistic about US equities in 2024, driven by strong fundamentals and easing Treasury pressures. However, political developments and Fed policy clarity will remain critical drivers.