Stock Market Today: Wall Street is slipping as 2024 begins, giving back some of last year's big gains

NEW YORK (`) — Wall Street started 2024 weakly on Tuesday, giving back some of its strong gains from last year.

The S&P 500 was down 0.6% in afternoon trading after touching near its all-time high about two years ago. The Dow Jones Industrial Average was up 41 points, or 0.1%, as of 1:10 p.m. Eastern time, and the Nasdaq Composite was 1.7% lower.

Some of last year's biggest winners posted the biggest losses, including a 3.5% decline at Apple. TeslaAnother of the “Magnificent 7” Big Tech stocks that accounted for much of Wall Street's gains last year swung between losses and gains after reporting shipments and production for the end of 2024. Most recently it was 0.4% lower

Netherlands-based ASML sank after the Dutch government partially revoked a license to ship some products to customers in China. The United States is pushing for restrictions on exports of chip technology to China. U.S.-listed ASML shares fell 4.4%, and U.S. chip stocks also fell.

Healthcare stocks held up better after Wall Street analysts raised their ratings on some, including a 15% rise for Moderna. Amgen's 3.9% gain was the single biggest force lifting the Dow.

Much of Wall Street had at least been preparing for a pause in the big rally that led the S&P 500 to nine straight weeks of gains and just 0.6% of its record high. This big rise came amid growing hopes that the Federal Reserve may have conjured a perfect way out of high inflation: one in which high interest rates slow the economy enough to cool inflation, but not so much that it causes a painful recession cause.

Now there is hope that the Fed will make a drastic change of course in 2024 and cut interest rates several times. Cuts can reduce pressure on the economy and increase the price of investments. But even if these hopes are high, they are not yet secured. And stock and bond prices have already risen sharply beyond expectations.

Economists at Deutsche Bank are primarily assuming that the Federal Reserve will cut its key interest rate by 1.75 percentage points this year from the current 5.25% to 5.50%. That's slightly more than most Wall Street traders are betting.

But Deutsche Bank economists led by Matthew Luzzetti also assume that a mild recession will weaken the labor market more than the Federal Reserve and much of Wall Street expect. That's partly because economists at Deutsche Bank expect the Fed to “remain committed to not repeating the mistakes of the 1970s of avoiding premature interest rate cuts.”

That would give the interest rate hikes already initiated by the Fed more time to fully penetrate the system and slow the economy. The Fed's key interest rate is at its highest level in decades; two years ago it was practically zero.

A report on Tuesday showed that the U.S. manufacturing industry may be weaker than expected. S&P Global said it contracted more last month than an earlier preliminary reading suggested, as new sales fell due to weakness both abroad and domestically. However, business confidence rose to a three-month high.

As with stocks, government bond yields in the bond market also fell slightly on Tuesday after the big moves since the fall. The yield on the 10-year Treasury note rose to 3.94% from 3.87% late Friday.

More high-profile economic reports will be released later this week. On Wednesday, the Federal Reserve will release minutes from its latest policy meeting, which has raised hopes for a series of interest rate cuts this year. Another report on the same day will show how many job openings U.S. employers posted at the end of November, data that the Federal Reserve tracks closely. On Friday, the US government will release its monthly report on job growth across the country.

In overseas stock markets, indices fell 1.5% in Hong Kong and 0.4% in Shanghai on concerns about Chinese manufacturing and real estate sector.

South Korea's Kospi rose 0.5% and indices were mixed across much of Europe. Japan's markets were closed for a holiday.