Market Retreat Accelerates as Tech and Mining Sectors Face Mounting Pressure

Stocks Slip Across the Board on Holiday-Shortened Trading

Major US indices faced selling pressure on the final trading day of the year, with the S&P 500 down -0.33%, the Dow Jones down -0.35%, and the Nasdaq 100 retreating -0.34%. Futures markets signaled similar weakness, with March E-mini S&P contracts sliding -0.35% and March E-mini Nasdaq futures dropping -0.38%. The broader market retreat pushed the S&P 500 and Dow to 1-week lows, while the Nasdaq 100 touched a 1.5-week low.

Trading volumes remained thin throughout the session, as markets in Germany and Japan remained closed for New Year holidays, limiting overall market participation. The light volume environment amplified moves in thin-trading conditions.

What’s Driving Stocks Decline: Chip Weakness and Commodity Pressure

Semiconductor stocks emerged as the primary drag on equities, with chip makers including Micron Technology (down >-1%), KLA Corp, Western Digital, Marvell Technology, Qualcomm, and Broadcom all declining more than -1%. This sector-wide weakness in chip stocks reflected broader concerns about demand dynamics in the semiconductor space.

Mining-related equities extended losses alongside plunging precious metal prices. Gold tumbled to a 2.5-week low while silver prices crashed more than -7%, pressuring mining stocks. Newmont and Barrick Mining both fell sharply, with Freeport-McMoRan down -0.69% and Hecla Mining declining -0.46%.

Economic Data Points to Labor Strength, Complicating Fed Outlook

A hawkish jobs report caught markets off-guard as US weekly initial unemployment claims unexpectedly fell 16,000 to a 1-month low of 199,000, signaling a tighter labor market than anticipated. This strength in employment data pushed the 10-year Treasury yield up +2 basis points to 4.14%, as traders reassessed inflation risks and Fed policy direction.

Meanwhile, Chinese economic data offered a bright spot for global growth prospects. December’s manufacturing PMI accelerated +0.9 points to 50.1, the fastest expansion pace in 9 months and well above expectations of 49.2. The non-manufacturing PMI similarly beat expectations, rising to 50.2 versus forecasted 49.6.

Seasonal Tailwinds Clash with Near-Term Headwinds

Historically, the final two weeks of December favor equity returns, with the S&P 500 gaining 75% of the time since 1928, averaging +1.3% gains. However, this year’s rally faces headwinds from elevated bond yields and sector-specific weakness.

Standout Stock Moves Amid Mixed Sentiment

Beyond the chip and mining carnage, individual names showed divergent paths. Corcept Therapeutics crashed more than -51% after the FDA rejected its relacorliant drug candidate, citing insufficient evidence on effectiveness. GlobalFoundries tumbled more than -2% following a Wedbush downgrade to neutral.

On the positive side, Vanda Pharmaceuticals soared more than +31% after FDA approval for its Nereus drug treating motion-induced vomiting. Terawulf climbed more than +5% on a Keefe, Bruyette & Woods upgrade to outperform. Nike gained more than +2% after SEC filings revealed CEO purchases of roughly $1 million in shares.

Looking Ahead: Fed Rate Cut Odds Remain Low

Markets are pricing in just a 15% probability of a -25 basis point rate cut at the Federal Reserve’s January 27-28 policy meeting, suggesting the central bank will maintain its hawkish stance amid stronger-than-expected labor market data.