Stocks rise 20% this year at the end of 2023 as robust economy energizes investors | Business

NEW YORK – Stock prices fell on the final trading day of the year, although Wall Street still posted surprisingly strong gains. The benchmark S&P 500 index fell slightly on Friday, but ended 2023 with an annual gain of 24.2%. The Dow Jones Industrial Average is up more than 13% this year. The Nasdaq rose 43% for the year, driven by gains in major technology companies including Nvidia, Amazon and Microsoft. Treasury yields were mixed and crude oil prices were relatively stable.

This is a recent update. `'s earlier story follows below.

NEW YORK – Stocks fell on the final day of trading for 2023, in a surprisingly strong year of gains on Wall Street.

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But according to S&P Dow Jones Indices, the so-called “Magnificent 7” companies – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla – accounted for about two-thirds of the S&P 500's gains this year. Nvidia leads the group with an increase of around 240%.

The S&P 500 index fell 0.3% on Friday, just below the all-time high it reached in January 2022. It is up 24.2% for the year after losing 19% in 2022.

The Dow Jones Industrial Average fell 60 points, or 0.2%, to 37,651, a day after hitting another record. It is up more than 13% for the year after falling 8.8% last year.

The tech-heavy Nasdaq fell 0.5% as of 2:12 p.m. Eastern time and is up 43% for the year, largely thanks to the movement of these blue-chip companies. The index fell 33% in 2022.

Smaller company stocks staged a late rally but recovered most of their losses from last year. The Russell 2000 index is up 15.5% in 2023 after falling 21.6% in 2022.

The rally that began in November helped extend market gains beyond the big tech companies. It was a big psychological shift for investors, said Quincy Krosby, chief global strategist at LPL Financial.

“Investors were able to accept the fact that the market would end the year in positive territory,” Krosby said. “Above all, the broad market participation particularly reinforced and confirmed the price gains of the shares of smaller companies.”

Stocks on European markets rose slightly on Friday, also after a year of gains. The benchmark indices in France and Germany rose by double digits, while the British index rose by almost 4%.

Asian markets witnessed a mixed session for most markets on the last trading day of the year. The Nikkei 225 in Tokyo fell 0.2% to 33,464.17. It rose 27% in 2023, its best year in a decade, as Japan's central bank inched toward ending its long-standing ultra-loose monetary policy after inflation finally exceeded its target of around 2%.

Hong Kong's Hang Seng Index closed flat, while the Shanghai Composite Index gained 0.7%. The Shanghai index lost about 3% this year and the Hang Seng fell almost 14%. Weakness in the real estate sector and global demand for Chinese exports, as well as high debt levels and wavering consumer confidence, have weighed on the country's economy and stock market.

All major indexes held on to modest weekly gains, with the S&P 500 on track for a rare ninth straight week of gains.

Investors in the US began the year expecting inflation to ease further as the Federal Reserve raised interest rates. The trade-off would be a weaker economy and possibly a recession. But while inflation has fallen to around 3%, the economy is doing well thanks to solid consumer spending and a healthy job market.

The stock market is now betting that the Fed can achieve a “soft landing,” in which the economy slows just enough to ease high inflation, but not so much that it falls into recession. Therefore, investors now assume that the Fed will start cutting interest rates as early as March.

The Fed has announced that it will cut its key interest rate by three quarter points next year. This rate is currently at its highest level in two decades at 5.25% to 5.50%.

This could boost broader market momentum even further in 2024. High interest rates and yields on government bonds are putting pressure on investment prices, so a sustained trend reversal means further relief from this pressure. Wall Street is forecasting stronger profit growth for companies next year after a largely lackluster 2023 as companies grapple with higher production and labor costs and a shift in consumer spending.

The yield on the 10-year Treasury note was 3.88% on Friday, down from 3.85% late Thursday. It topped 5.00 percent in October but has fallen broadly since then, easing pressure on stocks.

The yield on the two-year Treasury note, more in line with Fed expectations, fell to 4.25% from 4.28% late Thursday. In October it also exceeded the 5 percent mark.

U.S. and international crude oil prices were relatively stable on Friday. Oil prices have fallen more than 10% this year, defying some experts' predictions that they could top $100 a barrel.

Despite production cuts by OPEC, a war between energy exporter Russia and another in the Middle East, the U.S. benchmark crude oil price fell nearly 11% in 2023 and a whopping 21% in the final three months of the year.

Increased production in the USA, now the world's largest oil producer, as well as in Canada, Brazil and Guyana offset lower OPEC production. Not all OPEC members participated in the cuts and some countries such as Iran and Venezuela are pumping more oil, energy analysts say.