Wall Street recorded its second-lowest close as 2024 began with profit taking. By Reuters

© Reuters. FILE PHOTO: People walk around the New York Stock Exchange in New York, USA, December 29, 2023. REUTERS/Eduardo Munoz/file photo

David French

(Reuters) – U.S. stock indexes closed their second session of the year lower again on Wednesday on extended profit-taking after a strong finish to 2023, while minutes from the Federal Reserve’s December meeting failed to shake the jitters hanging over markets.

This is the first time the benchmark has started the year with two consecutive losses since it began a three-session skid in 2015. On a percentage basis, this is also the worst two-day performance since the end of October.

The decline contrasts with blistering gains in all three of Wall Street’s major benchmarks over the last two months of the year. The S&P 500 was near record highs last week as signs of cooling inflation prompted investors to bet on an aggressive rate cut schedule.

But investors have been cautious so far in 2024, wary of the direction the U.S. central bank is expected to move toward interest rate cuts this year and how quickly that could be implemented. While the Fed is widely expected to keep interest rates on hold in January, traders give the odds of a 25 basis point rate cut in March a 67% chance, according to CMEGroup’s FedWatch tool.

Federal Reserve minutes released on Wednesday provide new insights as policymakers appear increasingly confident that inflation is under control, diminishing “upside risks” and growing concerns about the harm that “overly restrictive” monetary policy could do to the economy. provided.

But little is known about when the interest rate cuts will begin.

“The market wanted to hear when and by how much the Fed was going to cut rates, but they didn’t understand that even though it’s not the Fed’s job to cut rates,” said Jason Betts, a private wealth advisor at Ameriprise Financial (NYSE). :).

“What we’re seeing in the selloff today is probably some frustration with the Fed’s lack of transparency.”

Betz noted that profit taking from 2023 earnings and rebalancing in the new year are also likely factors influencing traders’ thinking.

Shares of large-cap interest rate sensitive stocks fell, with Nvidia (NASDAQ:), Apple (NASDAQ:) and Tesla (NASDAQ:) falling between 0.7% and 4%.

The S&P 500 fell 38.02 points, or 0.8%, to close at 4,704.81, while the Nasdaq Composite closed down 173.73 points, or 1.18%, at 14,592.21. The Dow Jones Industrial Average fell 284.85 points, or 0.76%, to 37,430.19.

Airline stocks have come under pressure as concerns about fuel costs rise amid a surge in oil prices caused by the shutdown of Libya’s largest oil field. The S&P 1500 Passenger Aviation Index fell 4%. (or)

Higher crude oil prices supported the energy index, which rose 1.5%, the biggest gain among a handful of S&P sectors in positive territory.

Financials were among the lower trading sectors, down 0.8%. Charles Schwab (NYSE:) and Blackstone (NYSE:) are among the stocks driving the index lower. After Goldman Sachs downgraded its investment opinion from ‘buy’ to ‘neutral’, it fell 3% and 4.6%, respectively.

But Citigroup rose for a second straight day, rising 1.1% to its highest level since mid-August 2022. This comes as the bank continues to benefit from the price target upgrade announced the day before and an optimistic analyst report from Wells Fargo.

Volume on U.S. exchanges was 11.84 billion shares, compared to the average of 12.35 billion shares over the past 20 trading days.