Stock Market Today: Dow Dives 729 Points but Bounces Back

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All three main equity indexes gapped down more than 1% at the open and closed lower for the third straight session on Monday as investors continued to reduce exposure to risk assets at the end of another strong year for stocks.

Bitcoin is still sliding despite more MicroStrategy purchases, and the yield on the 10-year U.S. Treasury note retreated from seven-month highs at the beginning of another holiday-shortened trading week.

Buyers did step in before noon to lift the indexes off their lows, providing some hope for a Santa Claus rally after all. The official Santa Claus rally period as defined in 1972 by Stock Trader's Almanac founder Yale Hirsch includes the last five trading days of the year and the first two trading days of the new year.

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That means investors can still bid stocks higher tomorrow, Thursday and Friday and fulfill the indicator. As Yale's son Jeff writes, "Failure to rally tends to precede bear markets or times when stocks could be purchased at lower prices later in the year."

Note that the stock market is open for regular hours on Tuesday, but the bond market will close at 2 pm Eastern tomorrow. And both the stock market and the bond market are closed on Wednesday for New Year's Day.

Nvidia leads, Boeing lags

Nvidia (NVDA) was the best performer among the 30 Dow Jones stocks on Monday after it was the worst performer on Friday, rising 0.4% to open this week following its 2.0% decline to close last week. In fact, NVDA was the only Dow stock to post a gain on Monday.

Nvidia CEO Jensen Huang is scheduled to speak on Monday, January 6, at CES 2025 in Las Vegas. As Elsa Ohlen of Barron's reports, investors are already looking past Nvidia's Blackwell chip to its next new semiconductor, the Rubin.

Boeing (BA) was down 2.3% after a Jeju Air Boeing 737-800 skidded without its landing gear deployed and crashed into a concrete wall at Muan International Airport in South Korea, killing 179 passengers.

Following the incident, the South Korean government said it will conduct safety inspections of all Boeing 737-800 aircraft operated by South Korea-based airlines.

The Dow Jones Industrial Average staged a decent intraday rebound but still finished the day down 1% at 42,573. The S&P 500 was off 1.1% at 5,906, and the Nasdaq Composite lost 1.2% to 19,486.

Home sales surprise, 10-year yield retreats

There is very little on the economic calendar this week, but the National Association of Realtors (NAR) did report Monday morning that pending home sales in the U.S. grew for the fourth straight month in November and are now at their highest levels since February 2023. The NAR's pending sales index was up 2.2% vs a forecast increase of 0.7%.

According to the NAR, "Consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory. Buyers are no longer waiting for or expecting mortgage rates to fall substantially."

Noting the bigger-than-expected increase was driven almost entirely by activity in the largest region of the U.S., the south, Raymond James Chief Economist Eugenio J. Alemán said that "a healthy labor market and growing inventory should continue to be supportive of homebuyers" even if Fed rate cuts don't push mortgage rates meaningfully lower.

The yield on the 10-year U.S. Treasury note was down to 4.541% as of 4 pm Eastern on Monday, retreating from 4.619% on Friday and a seven-month high of 4.641% on Thursday. The 10-year yield is up more than 100 basis points since the Federal Reserve started cutting the target range for the federal funds rate in September.

After the Fed cut interest rates by 50 basis points in September and 25 basis points in both November and December, Brian Rehling, head of global fixed income strategy at Wells Fargo believes "the rate-cutting cycle is near its end." Rehling expects just one cut in 2025, reiterating that Wells Fargo's "projections consistently saw fewer rate cuts as economic strength and stubborn inflation persisted."

MicroStrategy and bitcoin after $100,000

Bitcoin was up 0.5% during the 24 hours through the closing bell on the New York Stock Exchange. But the world's No. 1 cryptocurrency is now down 13% from its December 17 all-time high of $108,268.

That's despite the fact that MicroStrategy (MSTR) continues to accumulate and hold bitcoin (BTC) on its balance sheet as a major part of its corporate strategy. MicroStrategy reported on Monday that it bought another $209 million worth of BTC from December 23 through December 29 at an average price of $97,837.

That's down from total purchases of $561 million for the period reported on December 23, $1.5 billion on December 16 and $2.1 billion on December 9. MicroStrategy now holds 446,400 BTC with a market value of approximately $42 billion based on Monday's price of $94,168.

TD Cowen analyst Lance Vitanza recently noted that Michael Saylor's outfit – ostensibly a software company – is embarked on a particularly risky strategy. "This model only works if the asset, bitcoin in this case, not only continues to appreciate, but continues to appreciate considerably faster than alternatives," Vitanza said.

MSTR, which was down 8.2% on Monday, has declined 16.8% since it was officially added to the Nasdaq-100 on December 23. Vitanza rates MSTR a Buy with a 12-month price target of $550, implying 81.5% upside from its Monday close.

RIP President Jimmy Carter

U.S. stock markets will close on Thursday, January 9, in observance of a national day of mourning to honor President Jimmy Carter, who died on December 29 at 100.

The 39th president, Carter served from January 1977 to January 1981. As Ryan Detrick of Carson Group notes on X, during his presidential term the S&P 500 gained 27.6%, an annualized return of 6.3%.

His term was defined by high inflation and low economic growth, a set of circumstances that inspired the term stagflation, as well as the Camp David Accords and the Iran hostage crisis.

The longest-living chief executive in U.S. history, Carter's post-presidency is widely held as a standard for behavior once one leaves the White House based on his international peace efforts and his work with Habitat for Humanity.

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David Dittman is the former managing editor and chief investment strategist of Utility Forecaster, which was named one of "10 investment newsletters to read besides Buffett's" in 2015. A graduate of the University of California, San Diego, and the Villanova University School of Law, and a former stockbroker, David has been working in financial media for more than 20 years.