S&P 500 and Nasdaq Close Lower in Holiday Trading as Meta Gains on AI Deal
US stock markets ended slightly lower in thin holiday trading as technology and financial stocks declined, offsetting gains in communication services led by Meta's 1.10% rise on its AI startup acquisition. The S&P 500 fell 0.14% while Nasdaq dropped 0.23%, with energy stocks outperforming on geopolitical tensions and both major indices positioned for their eighth consecutive monthly gain since 2017.
*this image is generated using AI for illustrative purposes only.
Major US stock indices closed marginally lower on Tuesday as holiday-thin trading volumes and mixed sector performance characterized the session. The modest declines came as gains in communication services stocks were offset by weakness in technology and financial sectors.
Market Performance Overview
The three major indices posted small losses in choppy trading conditions:
| Index | Closing Level | Daily Change | Percentage Change |
|---|---|---|---|
| S&P 500 | 6,896.24 | -9.50 points | -0.14% |
| Nasdaq Composite | 23,419.08 | -55.27 points | -0.23% |
| Dow Jones Industrial Average | 48,367.06 | -94.87 points | -0.20% |
Trading volumes remained significantly below average at 12.63 billion shares, compared to the 20-day average of 16.03 billion shares. This thin volume environment, typical during holiday-shortened weeks, contributed to heightened market volatility according to analysts.
Meta Leads Communication Services Higher
Communication services emerged as one of the day's best-performing sectors, driven primarily by Meta Platforms' 1.10% gain. The social media giant announced its acquisition of Chinese-founded artificial intelligence startup Manus, part of accelerated efforts to integrate advanced AI capabilities across its platforms including Facebook and Instagram.
The acquisition highlights the ongoing corporate focus on artificial intelligence integration, which has been a key driver of market performance throughout the year.
Technology Stocks Face Pressure
Information technology stocks ended the session lower despite mixed individual performances:
| Stock | Performance |
|---|---|
| Apple | -0.30% |
| Nvidia | -0.40% |
| Microsoft | Slight gain |
These heavyweight technology stocks had previously enjoyed a six-session winning streak, their longest since September, before snapping that run on Monday. The recent rally had helped propel the S&P 500 to record highs last week.
Mark Hackett, chief market strategist at Nationwide, noted that "the growth rates are going to converge between technology and everything else next year and the valuation gap is so wide, it absolutely is justified to see repositioning. It's just a healthy rebalancing of allocations more so than an emotionally driven sell-off."
Financial Sector Weighs on Markets
Financial stocks contributed to the day's declines, with several major institutions posting losses. Goldman Sachs and American Express weighed particularly on the Dow Jones Industrial Average. Citigroup fell 0.80% following its announcement that the board approved the sale of its Russian unit, AO Citibank, to Renaissance Capital. The transaction will result in a pre-tax loss of approximately $1.20 billion, largely related to currency translation adjustments.
R. Scott Siefers, analyst at Piper Sandler, commented that "investors will look past it as a non-core item and focus more on the idea that resolution of another legacy issue is getting closer to the finish line - a positive for Citi's ongoing transformation."
Energy Sector Outperforms
Energy stocks bucked the broader market trend, with the S&P energy sub-index rising 0.80% to outperform other sectors. The gains came as oil prices found support from geopolitical tensions, with Russia indicating it would toughen its negotiating stance after accusing Ukraine of attacking a Russian presidential residence.
Market Breadth and Federal Reserve Outlook
Market breadth showed a negative bias across both major exchanges. On the NYSE, declining issues outnumbered advancers by a 1.06-to-1 ratio, with 190 new highs and 80 new lows recorded. The Nasdaq showed broader weakness, with declining issues outnumbering advancers by a 1.64-to-1 ratio as 2,913 stocks fell while 1,780 rose.
The S&P 500 posted 3 new 52-week highs and one new low while the Nasdaq Composite recorded 33 new highs and 205 new lows.
The US Federal Reserve agreed to cut interest rates at its latest meeting only after a deeply nuanced debate about the risks facing the US economy, according to minutes of the latest two-day session. The Fed next meets on January 27-28, with investors currently expecting the central bank to leave its benchmark rate unchanged.
Year-End Performance and Outlook
Despite Tuesday's modest declines, both the S&P 500 and Dow Jones Industrial Average remain positioned for their eighth consecutive month of gains, which would mark their longest monthly winning streak since 2017. The S&P 500 has gained approximately 17.00% year-to-date, supported by artificial intelligence-driven enthusiasm that has helped US markets outperform international counterparts.
Some investors are eyeing a "Santa Claus rally," in which the S&P 500 typically posts gains over the last five trading days of the year and the first two of January, according to the Stock Trader's Almanac.
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