Dow collapses as end-of-year Santa rally fails to ignite

The holiday cheer on Wall Street came to an abrupt end Friday, with all three major benchmarks collapsing in a widespread selloff affecting even the technology and growth stocks that had driven markets higher for much of the week of shortened negotiation.

In afternoon trading, the Dow Jones Industrial Average plunged 328 points, or 0.8%, to 42,997. The S&P 500 lost 1.7% and the Nasdaq fell more than 450 points, or 2.3%.

The S&P 500 slipped 1.2% and the Nasdaq 326 points, or 1.6%.

Despite Friday’s struggles, all three indexes were expecting weekly gains, with the S&P 500 now about 2.3% below its all-time high of 6,099.97 points hit on Dec. 6.

The selloff thwarted the seasonal Santa rally, in which stocks traditionally rise during the last five sessions of December and the first two sessions of January. Since 1969, the S&P 500 has risen 1.3% on average, according to the Stock Trader’s Almanac.

“If nothing else, today reminds us that just because a Santa Claus gathering is a statistical probability, it is far from guaranteed,” said Steve Sosnick, chief market strategist at Interactive Brokers.

Thursday’s session hinted at slowing momentum, with the S&P 500 and Nasdaq posting marginal losses to end multi-session winning streaks.

Rising U.S. Treasury yields caught investors’ attention, with the benchmark 10-year security hitting a more than seven-month high in the previous session. The yield was close to this mark on Friday, at 4.61%.

Higher yields are seen as a drag on growth stocks, as they increase the borrowing costs needed for business expansion. These stocks, particularly the so-called Magnificent Seven tech mega-caps, which had been the main drivers of the market’s recovery in 2024, were also caught up in Friday’s sell-off.

For the second day in a row, Tesla led the group in declines, with a 4.4% drop. Amazon, Microsoft and Nvidia also lost more than 2%.

All 11 major S&P sectors fell. The worst performers on Friday were the three indexes that have been the lights of 2024: consumer discretionary, information technology and communications services. The trio traded down between 1.5% and 2.1% on the day.

“Technology, which has experienced tremendous growth, is starting to decline. This is the start of a healthy correction that we will focus on over the next four to eight weeks as we change administrations,” said Jay Woods, chief global strategist at Freedom Capital Markets.

News events helped some stocks stave off the market sell-off.

Amedisys gained 4.7% after the home health provider and insurer UnitedHealth extended the deadline to close their $3.3 billion merger.

Lamb Weston climbed 4.1% after a filing showed activist investor Jana Partners was working with a sixth executive to push for changes at the French fry maker, a move that could result in the replacement of the majority of the company’s board of directors.

Trading volumes during the holiday-shortened week were below the six-month average and are expected to remain subdued through January 6. The next major market focus will be the December jobs report, due January 10.