US Market Summary: Nasdaq Dips, Energy Stocks Surge Amid Global Tensions and Fed’s Hawkish Stance

January 4, 2024

  • Nasdaq 100’s Decline: The index fell by 1.1%, marking its longest losing streak in over two months. This downturn reflects ongoing investor retreat from the previously successful tech sector.
  • S&P 500 and Russell 2000 Performance: The S&P 500 slid 0.8%, while the Russell 2000 experienced its most significant drop since the March banking crisis.
  • Specific Sector Movements: Tesla Inc. (NASDAQ: TSLA) and semiconductor stocks saw notable declines. Crypto-tied equities also struggled as Bitcoin lost most of its yearly gains.
  • Dollar Strength: The U.S. dollar strengthened against most Group-of-10 peers, continuing its longest run since November.
  • Federal Reserve’s Stance: The Fed indicated that interest rates might remain higher for longer than previously anticipated, although rate cuts could occur later in the year. Swap traders have scaled back their expectations for rate cuts.
  • Treasury Yields: Yields on the 10-year Treasury ended near session lows, reversing after initially climbing above 4%, the highest since mid-December.
  • Market Analysts’ Views: Analysts viewed the Fed’s update as hawkish. The Fed acknowledged more balanced risks to growth and inflation but emphasized that policy would stay restrictive for some time. Morgan Stanley’s Ellen Zentner suggested that the Fed is not planning to lower interest rates soon.

Energy Sector Rallies Amid Middle East Tensions and Libyan Oilfield Shutdown

On January 3, 2024, energy stocks, particularly in the oil and gas sector, experienced a notable rebound, with the S&P’s Energy sector rising by 1.6%.

A shutdown primarily drove this surge at Libya’s Sharara oil field, which produces 300K barrels per day, due to protests demanding jobs and services.

The closure, along with mounting tensions in the Middle East, including Houthi attacks on vessels in the Red Sea and deadly explosions in Iran, heightened concerns over global oil supply disruptions.

Consequently, crude oil futures rallied, with Nymex and Brent crude both ending their four-session losing streaks.

The top gainers in the S&P 500 were largely from the oil and gas sector, including Marathon Petroleum Corporation (NYSE: MPC), EOG Resources, Inc. (NYSE: EOG), and Chevron Corporation (NYSE: CVX).

Despite these gains, Brent crude time spreads indicated a market surplus, flipping into a contango structure.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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