The lacklustre session follows a year where Wall Street’s three major indexes notched double-digit gains on hopes around AI and stabilizing inflation

The S&P 500 and Nasdaq Composite closed the first trading session of 2024 down, weighed by a drop in Apple shares after a broker downgrade and declines among other big-tech names following a move higher by Treasury yields.

The lacklustre session follows a year where Wall Street’s three major indexes notched double-digit gains on hopes around AI and stabilizing inflation. The S&P 500 closed last week within 1% of a record closing high hit in early 2022.

However, equities were pressured on Tuesday as U.S. Treasury yields jumped, with the yield on 10-year notes rising above 4.000% to a two-week high before dropping marginally to 3.937%.

Such movement in Treasury yields reflected investors’ tempered expectations around cuts this year in U.S. interest rates. This, in turn, weighed on growth stocks – among them tech stocks – which would benefit from a more favourable rate environment.

Apple dropped 3.6% after Barclays downgraded the tech giant to “underweight”, citing weakening iPhone demand. Other megacap stocks also dropped, including Nvidia, Meta Platforms and Microsoft, which slid between 1.4% and 2.7%.

Everyone was very excited by the tail-end rally, the Federal Reserve – on the surface at least – paring back a little, and the fact we did not have a recession, said Jason Pride, chief of investment strategy & research at Glenmede.

But does that mean we are out of the woods yet? I suspect, even if the Federal Reserve brings rates down gradually, monetary policy is still tight and still likely to be a hindrance to overall economic activity, he said.

The Fed’s December policy meeting minutes and a range of labour market data are on the roster for this week as market participants look to ascertain the timing of possible rate reductions.

While the Fed is widely seen holding rates at its January meeting, traders expect a near 70% possibility of a 25 bps cut in March, as per the CME Group’s FedWatch tool.

The S&P 500 shed 27 points, or 0.57%, to close at 4,742.83 points, while the Nasdaq Composite lost 245.41 points, or 1.63%, to 14,765.94. The Dow Jones Industrial Average added 25.5 points, or 0.07%, to 37,715.04.