Wall Street slid on year-end profit booking; Boeing dragged

·         The market may be now worried about a potential Trump tantrum and Fed easing uncertainty, but Trump 2.0 may be more moderate under Musk's control

·         At Q2CY24 TTM EPS around 196 and 5900 SPX-500, the TTM PE is around 30

·         At projected CY24 TTM EPS of around 221, the projected PE is around 27, still at the bubble zone against average EPS growth of around 11%

Wall Street Futures stumbled in the last two trading days of the year on Trump 2.0 and Fed policy uncertainty amid fading hopes of the next Fed rate cut in March’25. Also, yearend profit booking led by techs, after the recent Santa rally dragged the Wall Street. Although the market is now still expecting three rate cuts of @25 bps cumulating 75 bps in 2025 (March + June September), the Fed may cut only two times cumulating 50 bps (June + December).

Boeing also dragged the Dow Jones Industrial Average (DJ-30) after its airplane (737-800) suffered another lethal accident in South Korea. On December 29, 2024, Jeju Air Flight 2216, a Boeing 737-800, crashed at Muan International Airport in South Korea, resulting in 179 fatalities and two survivors out of 181 passengers on board. The aircraft was en route from Bangkok to Muan. The plane attempted a belly landing after its landing gear failed to deploy, skidded off the runway, and collided with a concrete wall, leading to a catastrophic explosion. The aircraft crash-landed without deploying its landing gear and collided with a concrete barrier at the tail end of the runway, igniting a fireball upon impact.

A U.S. investigation team, including representatives from Boeing, is examining the crash site. Preliminary assessments suggest possible engine trouble and a malfunctioning landing gear as key factors in the disaster. The pilots had received warnings about a bird strike and sent out a distress signal before the crash Authorities are examining factors such as bird strikes, mechanical failure, and runway design. Notably, the pilot reported a bird strike shortly before the crash, which may have caused the mechanical failure of the landing gear.

However, the presence of a concrete wall near the runway's end is also questionable for overall runway safety implications. Various reports indicate the aircraft completed 13 flights in the 48 hours preceding the crash, raising concerns about potential overuse. This tragedy marks one of the deadliest aviation disasters in South Korea's history. Investigations are ongoing to determine the exact cause and to implement measures to prevent future occurrences. Boeing is again under scrutiny about the safety of its aircraft/auto-pilot model after the 737-MAX fiasco a few years ago.

In response to the tragedy, South Korea's Transport/Civil Aviation Ministry announced immediate safety inspections of all 101 Boeing 737-800 aircraft operated by local airlines. The inspections are focused on maintenance records and operational safety protocols. Following the latest SK crash, heavyweight Boeing's stock plunged as the series of accidents may also affect its safety image. However, the investigation is ongoing, with authorities looking into various factors that may have contributed to this tragic event, including potential design flaws related to airport infrastructure.

Market Impact:

Wall Street Futures stumbled from Santa Claus rally high in the last two trading sessions of the year (2024) on Trump and Fed policy uncertainty and also profit booking after an impressive rally, led by techs on AI optimism. Over the past few days, the U.S. stock market has experienced a downward trend, concluding 2024 on a weaker note. The market's recent downturn may be also attributed to factors such as year-end profit-taking, stretched valuation, and year-end positioning amid thinner liquidity.

Despite these short-term declines, the overall performance for 2024 was robust, with significant gains across major indices, fueled by optimism surrounding artificial intelligence (AI) advancements and anticipated dual stimulus-Trump’s fiscal and Fed’s monetary stimulus. But Wall Street came under stress on a less dovish Fed stance mid-Dec’24 as the Fed projected 50 bps cumulative rate cuts in 2025 against earlier 100 bps; the Fed front-loaded 50 bps rate cuts for 2025 in H2CY24 and thus may cut only 50 bps in 2025.

Blue chip Dow Jones Industrial Average (DJ-30): closed the year at 42,544.22, down 0.1% on the last trading day. Over the year, the Dow rose by almost +13.0%. The broader S&P 500 index (SPX-500) Closed at 5,881.63 Monday (31st Dec’24), marking a 0.4% decline for the day. Despite this, the index achieved a substantial annual gain of almost +24.0%, its second consecutive year with gains exceeding 20% and the strongest two-year performance since the late 1990s. The Tech heavy Nasdaq Composite (NQ-100) dropped 0.9% Monday, closing at 19,310.79. However, it recorded an impressive annual gain of around 27.0%, largely driven by gains in the technology sector and AI optimism.

In 2024, Dow Jones was dragged by Boeing, Amgen, J&J, Merck & Co, and United Health, while boosted by Nvidia, 3M, Amazon, American Express, Apple, Caterpillar, Goldman Sachs, IBM, JPM, Salesforce and Walmart. In summary, while the U.S. stock market has concluded 2024 on a high note overall, recent trends indicate a mix of optimism and caution as investors prepare for potential challenges amid Trump 2.0 uncertainty, less dovish Fed, and hopes & hopes of Gaza and Ukraine war ceasefire. With Trump’s inauguration slated for 20th Jan’25, the market as well as the Fed and also rest of the world are eagerly awaiting insights on his proposed policies, including tax cuts, tariffs, and immigration.

Weekly-Technical trading levels: DJ-30, NQ-100, SPX-500, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 42850) now has to sustain over 42300-42600 for any rebound to 43300/43500-43800/44000 and further 44400/44600- 45000/45500 and further 45800/46000-46200/46400 and 46800/47000-47500/48000 in the coming days; otherwise sustaining below 42250, DJ-30 may further fall to 41800/41500-40500/40400 in the coming days.

Similarly, NQ-100 Future (21350) has to sustain over 21200 for a recovery to 21500/21700-21800/22250 and further 22500/22700-23000/23300 in the coming days; otherwise, sustaining below 21150-21000, NQ-100 may further fall to 20800/20650-20450/20250 and 20000/19800-19650/19150 in the coming days.

Technically, SPX-500 (CMP: 5950), now has to sustain over 5900 for any further rally to 6000/6050-6100/6150 and 6200/63990-6350/6500 in the coming days; otherwise, sustaining below 5850, SPX-500 may further fall to 5775 and 5675/5600-5550/5500 in the coming days.

Also, technically Gold (CMP: 2630) has to sustain over 2655-2680 for a recovery to 2700-2725 and further 2735/2750-2775/2795 and 2815 in the coming days; otherwise sustaining below 2650-2640 may again fall to 2605/2600 and 2590/2565 and further fall to 2550/2500-2470/2450 in the coming days (depending upon Fed rate cuts, Gaza/Ukraine war trajectory); Gold surged almost 75% in the last one year since Gaza war started back in October’23. Now it may retrace to $2500-2400 levels if Trump indeed can mediate both the Gaza and Ukraine war ceasefire by early 2025.