Wall Street Sobers Up After December’s Rally

Wall Street’s longest winning streak in almost 20 years is close to ending, as stock investors’ celebrations over slowing inflation and the potential for cuts to interest rates have been dialed down as traders air caution over the lingering risks to the market.

The S&P 500 index is on track for a weekly loss — about 1.7 percent as of Thursday afternoon — that would end nine straight weeks of gains, the market’s longest winning streak since January 2004. The Nasdaq Composite, chock-full of tech stocks that soared in 2023, has inched lower for the past five days, a string of daily losses not seen since October 2022.

Coming on the heels of such a sharp rally, analysts and investors said that for the time being the moves signaled only a mild pullback, rather than the start of a more severe downturn. Investors’ unbridled optimism had pushed the S&P 500 almost 14 percent higher in the final two months of the year, to within a whisker of a new high.

Alongside caution that stock market valuations had risen too far too quickly, investors newfound sobriety this week was underpinned by a rethink about when the Federal Reserve will begin to lower interest rates — cuts that could bolster stock prices, corporate profits and consumer spending. Heading into the end of 2023, investors were betting that rate cuts could start as soon as March.