The Stock Selloff 12/30/24
Halftime Report
Deep Dive
Why is the S&P 500 on pace for one of its worst months of the year in December 2024?
The S&P 500 is experiencing a sell-off due to fading momentum in December, with the market narrowing to concentrated performance from the 'Magnificent Seven' stocks. This has led to frustration for both bulls and bears, as the Santa Claus rally is in jeopardy.
What is the significance of the 10-year yield reaching 4.5% in December 2024?
The 10-year yield at 4.5% indicates rising interest rates, which has put pressure on the market, particularly on high-beta momentum stocks and small-cap indices like the Russell 2000. This has contributed to the broader market sell-off.
Why is natural gas up 58% year-to-date in 2024?
Natural gas prices have surged due to colder-than-expected weather forecasts, reduced excess supply, and increased demand from utilities partnering with mega-cap companies like Microsoft for power generation. This has made natural gas a key focus for investors in 2025.
What are the potential headwinds for the stock market in 2025?
Potential headwinds include the risk of a Fed policy error by not cutting rates, high tariffs from the Trump administration that could hurt growth, a potential rethink of the AI story if spending doesn't lead to earnings growth, and the threat of bond vigilantes forcing higher interest rates.
Why is Microsoft spending $53 billion in capital expenditures in 2024?
Microsoft is investing heavily in artificial intelligence infrastructure, including NVIDIA chips, data centers, and global training programs. This spending is aimed at meeting the growing demand for AI, though it raises concerns about when the return on this massive investment will materialize.
What is the outlook for the housing market in 2025?
The housing market faces challenges due to mortgage rates above 7%, which are higher than expected. Builders are offering incentives to attract buyers, but this is impacting their margins. However, pending home sales have shown growth, indicating some consumer recalibration to higher rates.
Why is Tesla under pressure despite its strong year-to-date performance in 2024?
Tesla is facing pressure due to concerns about its Q4 deliveries falling below consensus and its high valuation. While the company is seen as more than just a car manufacturer, with potential in robotics and AI, its earnings growth has been decelerating, leading to bearish sentiment.
What is the significance of the MAG-7 stocks in the S&P 500's performance in 2024?
The MAG-7 stocks (Microsoft, Apple, Google, Amazon, Nvidia, Tesla, and Meta) have driven 85% of the S&P 500's gains since Election Day. Their concentrated performance has raised concerns about diversification, as they account for 40% of the index's weight.
Why is the home construction ETF (ITB) tracking for its worst month since 2020?
The ITB is under pressure due to rising mortgage rates above 7%, which are impacting affordability and builder margins. Despite some positive data on pending home sales, the sector faces challenges from higher rates and potential labor shortages.
What is the investment outlook for natural gas in 2025?
Natural gas is expected to be a key focus for investors in 2025 due to its role in power generation for data centers and utilities. With colder weather forecasts and reduced excess supply, natural gas prices are poised for continued strength.
- S&P 500 on pace for one of its worst months of the year
- Santa Claus rally in jeopardy
- High beta momentum stocks have broken their uptrend
- Concerns about the economy warrant caution into January
Shownotes Transcript