RIP Santa Rally: Futures Tumble As Mag 7 Slides

US equity futures dropped sharply on the second to last day of 2024, crushing a deathly blow to any hopes of a belated Santa rally, as the powerful meltup in technology shares and among momentum chasers crumbled in the final trading sessions of 2024. As of 8:00am, S&P 500 futures slumped 1%, dropping for a 3rd straight session and signaling extended weakness on Wall Street after Friday’s retreat led by tech megacaps weakness; Nasdaq futures also slid 1%. Monday's weakness was broad based: Europe’s Stoxx 600 index retreated, while Asian stocks snapped five days of gains. Treasuries reversed an earlier slide, and the 10-year yield dropped from near the highest levels since May. The dollar also reversed earlier gains while gold and bitcoin were relatively flat. The US economic data calendar includes December MNI Chicago PMI (9:45am, several minutes earlier for subscribers) and November pending homes sales and December Dallas Fed manufacturing activity (10am)

Mag 7 stocks were set to end the year on a damp note, with all in the red in pre market trading: Apple -0.6%, Nvidia -0.8%, Microsoft -0.4%, Alphabet -0.4%, Amazon -0.7% Meta Platforms -0.6%, Tesla -1.7% in premarket trading. Boeing shares slid 4.8% in premarket trading on Monday after a 737-800 aircraft operated by Jeju Air crashed at Muan International Airport. Investigators are focusing on a possible bird strike or landing-gear failure, and an analyst said it’s unlikely the events were related to Boeing’s production. Axsome Therapeutics shares fall 13% in premarket trading on Monday after the company announced its Phase 3 trial for AXS-05 in Alzheimer’s disease agitation.

The Mag 7 tech supergiants have been behind the 25% gain in the S&P 500 this year, which has prompted some to worry that the gains are too concentrated in a small group of names (see "Supercharged AI Bubble Or Epic Market Bust: BofA Derivative Desk's Dire 2025 Outlook"). Still, few are calling for the rally to end and none of the 19 strategists tracked by Bloomberg - all of whom were wrong in their 2024 year-end price forecasts - expects the S&P 500 to decline next year.

“There’s a little bit of trepidation heading into year-end, owing in part to uncertainty over how the international trade picture may take shape in 2025,” said Tim Waterer, chief market analyst at Kohle Capital Markets Pty. “Some traders are taking risk off the table heading into year-end.”

European stocks also fell in the penultimate trading session of 2024, tracking declines in their Asian counterparts amid thin trading volumes. The Stoxx 600 is down 0.2%, led lower by declines in media and health care shares. Trading in Europe’s equity benchmark was about 60% below the 20-day average. It’s the final session of 2024 for some markets including Germany, where the DAX benchmark is on course for a 19% annual advance, beating peers in the UK and France.

Earlier in the session, Asian equities snapped a five-day advance, with Japanese benchmark indexes leading losses. The MSCI Asia Pacific index declined as much as 0.6%, its biggest drop in a week, with Toyota, Sony and Hitachi dragging down the benchmark. Japan’s Topix Index fell from a five-month high on the last trading day of the year for the nation. Stocks also declined in Australia and India. Shares were mixed in China. The onshore CSI 300 gauge closed with small gains, while the Hong Kong measure fell, weighed down by technology names.

“Overnight weak markets in the US have weighed on sentiment, notably in Japan & Hong Kong,” said Kok Hoong Wong, head of institutional equities sales trading at Maybank Securities. “We would expect volumes to continue to be low for rest of the week, and sentiment to be cautious,” he said.

In FX, the Bloomberg Dollar Spot Index dropped 0.1% after rising more than 7% in 2024, driven by the anticipation of “America First” policies from President-elect Donald Trump. The kiwi tops the G-10 FX leader board, rising 0.4% against the greenback; NZDUSD and AUDUSD lead G-10 gains versus the dollar climbing as much as 0.5% respectively. The euro strengthened after Spanish consumer prices rose to 2.8% in December, exceeding expectations and staying above 2% for the second month; EURUSD rose as much as 0.2% to 1.0444.

Treasuries rose, with 10-year yields dropping from near the highest levels since May as the treasury market was close to erasing the small gains it has made so far in 2024. 10-year yields fell 5 bps to 4.57%, while German 10-year yields fall 1 bp to 2.39% having briefly risen after Spanish inflation data surprised to the upside.

In commodities, oil prices declined again, with WTI falling 0.3% to $70.40 a barrel. Crude is heading for a loss this year, with trading confined to a narrow range since mid-October. Gold fell $9 but was set for one of its biggest annual gains this century.  Bitcoin rose toward $94,000 before reversing.

The US economic data calendar includes December MNI Chicago PMI (9:45am, several minutes earlier for subscribers) and November pending homes sales and December Dallas Fed manufacturing activity (10am)

Market Snapshot

• S&P 500 futures down 0.2% to 6,012.75
• STOXX Europe 600 down 0.2% to 506.16
• MXAP down 0.5% to 181.98
• MXAPJ down 0.3% to 572.30
• Nikkei down 1.0% to 39,894.54
• Topix down 0.6% to 2,784.92
• Hang Seng Index down 0.2% to 20,041.42
• Shanghai Composite up 0.2% to 3,407.33
• Sensex down 0.6% to 78,199.73
• Australia S&P/ASX 200 down 0.3% to 8,235.01
• Kospi down 0.2% to 2,399.49
• German 10Y yield little changed at 2.39%
• Euro little changed at $1.0419
• Brent Futures little changed at $74.24/bbl
• Gold spot down 0.2% to $2,617.23
• US Dollar Index little changed at 108.05

Top Overnight News

• Tributes poured in for Jimmy Carter, who died at age 100. Joe Biden eulogized him as “an extraordinary leader, statesman and humanitarian,” while Donald Trump said all Americans “owe him a debt of gratitude.” The 39th US president helped broker peace between Israel and Egypt during a single term marred by high inflation, an oil shortage and Iran’s holding of American hostages. Biden declared Jan. 9 a National Day of Mourning. It’s unclear whether markets will be closed.
• Elon Musk’s growing political influence is eroding global resistance to his Starlink satellite network. Consumers are willing to overlook concerns about data security and privacy for access to reliable and fast internet. BBG
• Treasury Sec Yellen warned Fri night that extraordinary measures to avoid breaching the debt ceiling will need to be taken between Jan 14 and Jan 23 (those measures should push the ceiling deadline to the spring). WaPo
• Syria’s new de facto leader said it may take as long as four years to hold an election due to the difficulties involved in taking a census and drafting a constitution. FT
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• Nvidia is looking to robotics to drive its next leg of growth as competition rises in the core AI chip market (Nvidia believes the “ChatGPT moment for physical AI and robotics is around the corner”. FT
• China’s central government is trying to curb a spate of detentions by local authorities of business executives that is fuelling anxiety among entrepreneurs and risks undercutting efforts to boost economic growth. FT
• Spain’s CPI runs ahead of expectations for Dec, climbing 2.8% on an EU harmonized basis (up 40bp from +2.4% in Nov and 20bp above the consensus forecast of 2.6%). WSJ
• South Korean investigators are focusing on a bird strike and unusual landing-gear failure in the crash of a Jeju Air Boeing 737-800 that killed 179 people. Another Jeju aircraft suffered a landing-gear malfunction today but returned safely. Boeing shares fell premarket. BBG
• US energy production won’t rise rapidly in the coming years despite what Trump desires, for 2 main reasons: shale fields are aging (and thus a lot less productive than before) and they’re now mostly controlled by large oil companies (which are extremely disciplined on spending and output). WSJ