U.S. stocks trade mostly lower to start 2024, after Apple downgrade and looming jobs report

How stocks are trading

• The Dow Jones Industrial Average
  DJIA
  gained 51 points, or 0.1%, to 37,740.

• The S&P 500
  SPX
  fell 24 points, or 0.5%, to 4,745.

• The Nasdaq Composite
  COMP
  fell 232 points, or 1.6%, to 14,778.

On Friday, the Dow Jones Industrial Average fell less than 0.1%, the S&P 500 declined 0.3% and the Nasdaq Composite dropped 0.6%.

What’s driving markets

U.S. equities were starting the year’s first session mostly in the red. Though the Dow was edging higher, the S&P 500 and Nasdaq were lower.

It’s a bumpy beginning to the year after a blockbuster end to 2023. By the end of last week, the S&P 500 had not revisited its early January 2022 record close of 4796.56, but the index still logged its ninth straight week of gains.

Tuesday’s move lower follows soft data from China, which raised concerns about the health of the global economy, and rising oil prices on heightened tensions in the Middle East. An analyst downgrade for Apple Inc., one of the Magnificent Seven, wasn’t helping either.

There’s news headlines to consider, but also a mood check, especially after 2023 went out with a big bang, said Steve Sosnick, chief strategist at Interactive Brokers.

“The rally became so powerful that no manager could afford to be on  sidelines,” said Sosnick, calling it “weaponized FOMO” and an “everything” rally.

“After a big rally, it’s not unusual, and I would argue not unhealthy, to see the market correct a little, see some profit-taking,” he said in a phone interview.

Read also: Stock market’s 9-week rally leaves S&P 500 clearly ‘overbought’ — here’s the ‘good’ news

So it is back to business, and back to attention on the headwinds for investors, Sosnick said. “The mentality today is less about finishing the year on a positive note and more about the normal ebb and flow for markets, with a little bit bias towards risk off.”

New data Tuesday morning added to the view of a slowing American economy. Construction spending in November was up 0.4%, lower than the forecasted 0.6% spending rise. Though lower than expectations, the numbers mark the 11th straight month of construction spending increases.

However, also Tuesday, the S&P manufacturing purchasing managers index for December was 47.9 versus the initial 48.2.

It’s just the start on a slate of economic data coming this week. The big numbers come Friday, when the Labor Department releases the December jobs report. The economy could add a forecasted 170,000 jobs, down from 199,000 jobs added in November.

Before then, investors were given another gauge of consumer health. A downgrade of Apple stock
AAPL,
-3.94%
to underweight from neutral has pressured the Dow component’s stock price.

Apple shares were under pressure following the Barclays downgrade, which pointed to slackening consumer demand for some iPhones. Now the tech giant’s stock could be facing its steepest drop in four months.

Sentiment was further hit by a deadly earthquake in the western Coast of Japan. Adding to investor caution on Tuesday was heightened geopolitical angst as Iran said it would send a warship to the Red Sea after the U.S. Navy sank some of the Tehran-backed Houthi militia’s boats, Reuters reported.

Brent crude
BRN00,
-1.41%
fell 0.9% to trade near $76.35 a barrel. A concern has been that higher energy costs may again build inflationary pressures.

A flight to safety may have contributed to 10-year Treasury yields
BX:TMUBMUSD10Y
moving about 7 basis points higher to 3.95% on Tuesday, while 30-year Treasury yields also gained ground.

However, some analysts see bond markets continuing to support stocks. “The stage is set for further gains, certainly in terms of historical trends, which suggests that the momentum could spill over into January,” said Richard Hunter, head of markets at Interactive Investor.

But “the initial tests of investors’ mettle will come thick and fast during the month,” he said.

Companies in focus

•  Apple Inc. shares
  AAPL,
  -3.94%
  are 3.7% lower Tuesday after a downgrade from Barclays analyst Tim Long, who said it was “time for a breather.”  Long cut his rating to underweight from neutral, pointing to soft spots in consumer demand for certain Apple products.

• Tesla Inc. shares
  TSLA,
  +0.08%
  are flat in Tuesday trading even though its fourth-quarter delivery data beat expectations. Tesla delivered 484,507 vehicles in the fourth quarter, while the FactSet consensus was for 473,000 vehicles.

• Rivian Automotive Inc. shares 
  RIVN,
  -10.00%
  are 9.7% lower following 2023 delivery data from the electric-vehicle maker. Rivian said it delivered 50,122 vehicles in 2023, a 146.5% year-over-year increase, but the FactSet consensus was for 51,000 deliveries. 

• Moderna Inc.
  MRNA,
  +15.37%.
  shares are popping 15.3% higher Tuesday following a stock upgrade to buy. Oppenheimer analysts notched the stock to outperform from perform, pointing at some noteworthy products in the pharmaceutical company’s pipeline that are expected to gain regulatory approval.

— Jamie Chisholm contributed.