By Stephen Culp
NEW YORK (Reuters) -U.S. stocks softened on Friday, the last trading day of 2023, capping a robust year-end rally as investors eyed easier monetary policy in the year ahead.
The stock market has seen remarkable upward momentum in the closing months of the year, setting all three major indexes on course for monthly, quarterly and annual gains.
For the year, all three are set to post double-digit growth.
“On January of this year, 363 days ago, if I said I think the S&P is going to gain more than 20% in 2023, you would have put me into the slightly nutty category,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “There’s certainly reason to be pleased this year and there’s reason for optimism going into 2024.”
Even so, three major U.S. stock indexes were modestly lower on Friday as market participants prepared to shut the books on 2023 and head into the long holiday weekend.
“There’s really no reason for today’s small sell-off,” Pursche added. “There’s no news that’s driving it.”
“I would ascribe it to last-minute portfolio changes, profit taking as we enter the new year, and perhaps some rebalancing.”
Smallcaps came to life in the last months of the year, with the Russell 2000 roaring back from a year-to-date loss of 7.1% as of late October to notch what’s shaping up to be a 15% annual gain.
The S&P 500 is still drifting within 1% of its closing high reached on Jan. 3 2022. Closing above that level – 4,796.56 – would confirm the bellwether index entered a bull market when it touched its bear market trough in October 2022.
It was a tumultuous year marked by the U.S. banking crisis in March; an artificial intelligence stocks boom; the Israel-Hamas war; and fears that restrictive Fed policy could tilt the U.S. economy into recession.
Falling interest rates helped spark a remarkable year-end rally, which shifted into overdrive in December when the Federal Reserve opened the door to U.S. interest rate cuts in 2024 after a rate hike campaign that helped bring inflation down toward the central bank’s 2% annual target.
At 2:03PM ET, the Dow Jones Industrial Average fell 62.53 points, or 0.17%, to 37,647.57, the S&P 500 lost 14.27 points, or 0.30%, to 4,769.08 and the Nasdaq Composite dropped 66.26 points, or 0.44%, to 15,028.87.
Of the 11 major sectors of the S&P 500 real estate was down the most, while consumer staples stocks were the sole gainers.
For the year, technology, communication services, and consumer discretionary were the outperformers, with utilities, energy and consumer staples losing ground.
Among corporate movers, Uber Technologies and Lyft lost 2.4% and 2.8%, respectively, following a report that Nomura downgraded the ride-sharing platforms.
Markets will be closed on Monday, Jan. 1 for New Year’s Day.
Declining issues outnumbered advancing ones on the NYSE by a 2.42-to-1 ratio; on Nasdaq, a 2.33-to-1 ratio favored decliners.
The S&P 500 posted 30 new 52-week highs and no new lows; the Nasdaq Composite recorded 68 new highs and 46 new lows.
(Reporting by Stephen Culp; Additional reporting by Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by David Gregorio)
