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Stocks drop in thin year-end trade amid tax selling, profit taking

(Reuters) -Tech and growth stocks dragged Wall Street’s main indexes lower on Friday, at the end of an upbeat holiday-shortened week that was driven by expectations around a traditionally strong period for markets.

The Dow Jones Industrial Average fell 0.82%, the S&P 500 was down 1.24% and the Nasdaq Composite briefly fell more than 2% and was down 1.80%.

Ten of the 11 major S&P sectors, including information technology and consumer discretionary fell the most, down about 2% and 1.9%, after powering most of the broader market’s gains in 2024.

COMMENTS:

STEVE SOSNICK, CHIEF MARKET STRATEGIST, INTERACTIVE BROKERS, GREENWICH, CONNECTICUT

“I’ve heard anecdotes that pension funds are rebalancing ahead of year-end, selling stocks and buying bonds. Unfortunately, I can’t verify that, but it would explain the sudden sell-off on no news. And of course, if large funds are selling stocks en masse, the megacap tech stocks would bear the brunt because of their heavy weighting in major indices.”

“If nothing else, today is a reminder that just because a ‘Santa Claus’ rally is a statistical likelihood, it is far from guaranteed.”

“We’ve seen an attempt at a buy-the-dips rally smacked back, which seems to confirm that this is some selling or rebalancing underway by a big investor.”

JAY WOODS, CHIEF GLOBAL STRATEGIST, FREEDOM CAPITAL MARKETS, NEW YORK

“What people are doing is they’re raising some cash. They’re taking some profits right now as we go into the end of the year and getting ready for an opportunity if it presents itself in the beginning of next year. Tech, which has had a tremendous run, is starting to pull back. I think this is the beginning of a healthy correction that will get focused over the next four to eight weeks as we switch administrations.”

ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, FAIRFIELD, CONNECTICUT

“Any kind of selling pressure sort of spirals a little bit out of control when you have a thinly traded market. And I think the selling pressure is really just people looking for direction.”

“It’s not a lot of institutions. I think a lot of non-professionals are looking seeing the market’s direction and they just go with the flow. There’s concerns that maybe the first part of this year can involve some repositioning and reallocation of funds and those that are trading today and next week are probably just trying to get a little bit ahead of that.”

“There’s uncertainty about the direction of interest rates and inflation, and the fact of all this is sort of coming together at one time. What is the Federal Reserve going to do in the first part of next year?”

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