Wall Street hits 1-week low in thin trading, elevated yields add pressure

Wall Street’s main stock indexes opened sharply lower on Monday and hit their lowest in over a week, as sparse trading volumes and the specter of elevated Treasury yields cast a cloud over the traditionally strong year-end rally for equities.

At 09:57am ET, the Dow Jones Industrial Average fell 651.52 points, or 1.52 per cent, to 42,340.69, the S&P 500 lost 89.52 points, or 1.51 per cent, to 5,881.32 and the Nasdaq Composite lost 326.47 points, or 1.66 per cent, to 19,397.26.

All 11 S&P 500 sectors fell, with consumer discretionary leading declines.

Growth stocks such as Tesla and Meta dropped 3.1 per cent and 2.2 per cent, respectively. Chip company Broadcom lost 3.8 per cent, sending the semiconductor index more than two per cent lower.

The weakness was atypical as equities tend to do well in the last five trading days of December and into the first two days of January, a phenomenon dubbed the Santa Claus rally. The S&P 500 has gained 1.3 per cent on average during the period since 1969, according to the Stock Trader’s Almanac.

The benchmark index eked out marginal gains last week, with analysts pointing to a strong run earlier in the year that sent valuations soaring. The index has been trading in a bull market for over two years and is poised to end its second consecutive year with gains of more than 20 per cent.

However, some analysts expect Trump’s policies to be inflationary, with the yield on the benchmark 10-year note trading near its highest level since May 2024. On the day, it dipped to 4.548 per cent.

“If yields continue to hold at these levels... this will be a strong headwind for equity prices, as investors choose the relative safety of a near-guaranteed 5 per cent return on funds in US Treasuries, compared with the uncertainty of stocks, many of which are trading at or near all-time highs,” said David Morrison, senior market analyst at Trade Nation.

The rise in Treasury yields since early December has pressured the S&P 500 and the Dow, setting the indexes on track for their roughest month since April.

The S&P 500 posted no new 52-week highs and 11 new lows while the Nasdaq Composite recorded 24 new highs and 66 new lows.