(Bloomberg) — An early rally in equities collapsed and major U.S. benchmarks were poised to extend a selloff that shaved more than a trillion dollars off share prices over the past four sessions. Tesla Inc's fall after Christmas increased to almost 20% after its annual vehicle sales fell.
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Treasury yields were steady while the rate on the 10-year benchmark was almost 20 basis points higher than the level before Jerome Powell's hawkish turn at a meeting of the Federal Reserve on 18 December. Big moves have increased across asset classes after Powell's board expressed their enthusiasm for interest rate cuts. The Cboe Volatility Index climbed for the fourth time in five days.
Tesla sputtered after the electronic vehicle marquee's fourth-quarter deliveries missed estimates and annual sales fell for the first time in more than a decade. The stock was on track for its worst five-day fall in more than two years.
For corporate earnings, 2025 will be a “show year for me,” according to Lisa Shalett at Morgan Stanley Wealth Management. As for the serious end of 2024, it's “too soon to call it a bad omen,” he told Bloomberg Television.
The treasury scrapped an early payment after a weekly jobless claims reading fell to an eight-month low. Bloomberg's gauge of dollar strength traded at a more than two-year high.
Goldman Sachs economists led by Jan Hatzius noted that “seasonal adjustment challenges can make jobless claims readings particularly volatile around the holiday season.”
US stocks had been straining to break a losing streak that took some of the shine off the S&P 500's best two-year run dating back to the late 1990s. The index is up more than 50% since the start of 2023, driven by gains in the tech megacaps amid enthusiasm over the boost to profits from artificial intelligence.
An attack on revelers celebrating the New Year in New Orleans put US domestic security back in the spotlight less than a month before Donald Trump was sworn in as president. The Federal Bureau of Investigation is investigating that incident as well as a deadly Tesla Cybertruck explosion outside Trump's Las Vegas hotel.
An overnight shooting at a nightclub in New York City added to the concern, while authorities said it was not related to terrorism.
The CBOE's measure of Wall Street stock sentiment, the VIX, touched 19. Readings above 20 indicate growing concern about near-term volatility.
On Friday, investors will watch the speaker of the House vote to see if Mike Johnson will keep his job. A GOP fight over his re-election could be ill for the president-elect's agenda, according to Tom Essaye, founder of the Seven Sides report.
If Johnson's confirmation takes several rounds of voting over several days, “that will be a bad sign for Republican unity and hopes that quick action on pro-growth policies will be a blow,” he wrote.
In the coming months, growth prospects in Europe and China, the path of Federal Reserve policy and Trump's ability to deliver on his campaign promises will be among the most pressing items on traders' radars.
European energy shares outperformed after a sharp rise in natural gas prices as the region braced for freezing winter temperatures without Russian supplies being delivered through Ukraine. A shipping agreement between the two warring nations expired on New Year's Day, with no alternative in place.
The euro fell to its weakest against the dollar in over two years reflecting concerns about European growth, US trade tariffs and the divergence between monetary policy and the US. Many strategists predict a slide to parity with the dollar or even lower this year.
In Asia, sentiment was dampened, with Chinese equities the worst performers as data pointed to a slowing economy and traders looked ahead to possible higher tariffs. A measure of MSCI Inc. shares fell. for the third day out of the last four. Financial markets in Japan remained closed.
Elsewhere in commodities, oil climbed after an industry report indicated that US crude stockpiles continued to shrink. A report from the American Petroleum Institute showed that inventories fell by 1.4 million barrels last week, which would be the sixth straight fall.
Gold rose, trading around $2,650 an ounce. Bitcoin extended its rally to a third day.
Key events this week:
Some of the main movements in markets:
Stocks
The S&P 500 fell 0.5% at 3:02 pm New York time
The Nasdaq 100 fell 0.6%
Dow Jones Industrial Average fell 0.6%
MSCI World Index fell 0.5%
The Chicago Board Options Exchange Volatility Index rose 6.6%
Currency
The Bloomberg Dollar Spot Index rose 0.4%
The euro fell 1% to $1.0253
The British pound fell 1.2% to $1.2373
The Japanese yen fell 0.2% to 157.63 per dollar
Crypto currency
Bitcoin rose 2.8% to $97,412.01
Ether rose 3% to $3,462.4
Bonds
There was little change in the yield on the 10-year Treasuries, which was 4.57%
Germany's 10-year yield increased one basis point to 2.38%
Britain's 10-year yield increased three basis points to 4.59%
Goods
West Texas Intermediate crude rose 2.1% to $73.22 a barrel
Spot gold rose 1.1% to $2,654.41 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Richard Henderson, Chiranjivi Chakraborty, Cecile Gutscher and John Viljoen.
