Dec. 31 (UPI) — Stocks closed lower on the final trading day of 2024 to end what has been a strong year for the Dow Jones Industrial Average and the S&P 500, which notched its second consecutive larger than 20% annual return in decades.
The Dow Jones Industrial Average closed down 29.51 points, or 0.07%, on Tuesday to close at 42,544.22. The S&P 500 was off 0.4% to 5,881 and the Nasdaq Composite was down 0.9% to 19,310.
Tuesday’s close marks the first time since 1966 that the S&P 500 ended the year with four-straight down days. December was the worst month for the S&P 500 and the Nasdaq since April, according to data from FactSet.
The lower New Year’s Eve close puts the so-called Santa Claus rally, defined as “the last five trading days of the year plus the first two trading days of the new year,” at risk, according to Adam Turnquist, chief technical strategist for LPL Financial.
“Since 1950, the S&P 500 has generated average and median returns of 1.3% during this period, widely outpacing the market’s average seven-day return of 0.3%,” Turnquist said.
Despite a sluggish December, the Dow added 12.88% for the year, while the Nasdaq gained 28.64% in 2024.
And the S&P 500 surged more than 23% this year after topping 24% in 2023. The two-year gain of 53% is the best since the S&P 500 rallied nearly 66% in 1997 and 1998, according to data from FactSet.
Analysts credit the enthusiasm for Artificial Intelligence and developments in Washington, D.C., including President-elect Donald Trump’s win in November and the prospect of lower taxes, for the positive year-end numbers.
“I think a lot of what drove that enthusiasm is you had good developments on all those fronts in 2024. You had inflation on a downward trajectory, the Fed coming out aggressively in September when they started cutting rates,” said Yung-Yu Ma, chief investment officer for BMO Wealth Management.
“And for a lot of the time you had a 10-year Treasury yield that was very well behaved, along with earnings growth. So you got everything together at once that was going well.”
Tech stocks also saw strong gains in 2024 as Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia and Tesla — also known as the “Magnificent Seven” — accounted for more than 50% of the S&P 500’s total gains, according to data from S&P Dow Jones Indices. Since November, those stocks have accounted for more than 96% of the S&P 500’s returns.
Bitcoin surged more than 120% in 2024, while gold rose nearly 29%.
“We believe the chances of another positive year in 2025 are favorable given the high probability of economic growth and a Fed that is likely to cut rates next year,” Jeffrey Buchbinder, chief equity strategist at LPL Financial, said in a Dec. 30 note.
“But if resurgent inflation takes rate cuts off the table or speculation gets out of hand, this bull market could have a difficult time making it through next year.”
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