US stocks experienced a significant decline on Friday, marking a down week despite a year of historic highs. The Dow plummeted by over 500 points, the S&P 500 saw a 1.6% decrease, and the Nasdaq Composite was down by 2.2%, primarily due to a selloff in Big Tech stocks. Notable companies such as Tesla, Amazon, Alphabet, Microsoft, and Nvidia all witnessed declines ranging from 2% to 4.5%.
Bitcoin, which had been on a remarkable late-year rally, also faced a downturn as traders engaged in profit-taking activities. The cryptocurrency dropped to approximately $93,900 on Friday after reaching a high of $106,000 earlier in the month, driven by optimism surrounding the potential crypto-friendly stance of President-elect Donald Trump's upcoming administration.
Additionally, Treasury yields rose on Friday, with the 10-year yield surpassing 4.6%, potentially prompting some investors to shift their focus away from equities. The thin trading volume during the shortened holiday week amplified market movements, with no significant news driving the selloff in equities. This phenomenon of dramatic market fluctuations during the Christmas week has become somewhat of a tradition, as reduced trading activity can have a substantial impact on stock indexes.
Low trading volume often leads to heightened volatility, as traders opt to secure profits and exit positions. Looking back at previous years, similar market turbulence occurred around the same time, with notable drops in the Dow on various dates in December. Despite the recent market fluctuations, analysts like Anthony Valeri, the investment management director at California Bank & Trust, suggest that stocks are likely to outperform bonds in 2025. Valeri advises investors to maintain their equity exposure in the New Year, emphasizing that stocks remain a solid investment option to hedge against inflation.
