Stocks dropped from record levels on Monday, with trading volume more than 30% below the 100-day moving average, according to Bloomberg. The recent equity rally paused as investors engaged in profit-taking on the penultimate trading day of the year. The S&P 500 fell 0.6%, though still remains on pace for its best year since 2013. The Dow lost 183 points, while the Nasdaq Composite slipped 0.7%.
Monday’s losses come despite a report from Beijing indicating that a Chinese trade delegation would visit Washington this weekend to sign the “phase one” accord. However, there was no official confirmation from either side.
Treasuries weakened, with the yield on the benchmark 10-year note up one basis point to 1.88%. The government yield curve steepened, with the spread between two- and 10-year rates widening the most since October 2018. Elsewhere, the U.S. dollar declined to its lowest level since July. In commodities, WTI crude pared an early session gain to add just 0.1% to $61.75/barrel.
All 11 S&P 500 sectors closed in negative territory. The Communication Services group led decliners, while the often cited “FAANG” cohort fell 1%. Technology stocks also lagged, though the sector remains on track for its best annual performance in a decade, up more than 47%.
On the data front, pending home sales rebounded 1.2% in November, while another report showed the advance goods trade deficit unexpectedly narrowed to its smallest since 2016. Separately, Chicago PMI for this month revealed economic activity improved in the Midwest, while the Dallas Fed’s Manufacturing Activity Index weakened in December.