S&P 500 Outlook: Chip Stock Sell-Off Weighs on Broader Market

Wall Street Slips as 2024 Ends with Strong Gains

The final trading day of 2024 saw Wall Street pull back slightly, with the S&P 500 declining 0.4% to close just below its 50-day moving average. Despite the dip, the benchmark index wrapped up the year with an impressive 23% gain, highlighting broad market strength. Trading volume on the NYSE eased, while Nasdaq activity rose slightly compared to Monday.

How Did Major Stocks Perform?

Palantir Technologies (PLTR), the year’s top-performing S&P 500 stock, slipped for the fourth consecutive session but held above its 50-day moving average. The AI software firm surged approximately 340% in 2024, driven by increasing demand for AI solutions. Palantir’s inclusion in the Nasdaq 100 and S&P 500 earlier in the year helped solidify its growth trajectory.

MicroStrategy (MSTR) dropped more than 5% after a major bitcoin purchase totaling $209 million. The stock is now over 40% below its November peak, reflecting ongoing investor caution around its aggressive bitcoin accumulation strategy. Nvidia (NVDA) also ended lower by more than 2%, capping a volatile year for chipmakers. Nvidia shares are forming a double-bottom base but remain under the 50-day moving average.

Are Chip Stocks Signaling Trouble?

The PHLX Semiconductor Index fell 1% on Tuesday, continuing weakness seen throughout December. A “death cross” formation—where the 50-day moving average falls below the 200-day—has triggered fresh bearish signals. The last time this occurred was in March 2022, leading to significant declines in chip stocks over the following months. The iShares Semiconductor ETF (SOXX) flashed similar warnings in November, with Nvidia, Broadcom (AVGO), and AMD contributing to the sector’s underperformance.

Sector Performance Highlights

Energy led sector gains, rising 1.35%, while consumer staples, financials, and healthcare sectors posted modest increases. Technology stocks fell 1.04%, weighing on broader indices. Nike (NKE) and Merck (MRK) stood out in the Dow, gaining 1% and 0.5%, respectively. However, tech heavyweights Apple (AAPL), Microsoft (MSFT), and Amazon (AMZN) all reversed earlier gains to close lower.

What’s the Market Outlook for Early 2025?

As 2025 approaches, semiconductor stocks face technical headwinds, suggesting potential volatility in the short term. However, AI, energy, and healthcare sectors remain well-positioned to drive growth. While some consolidation is likely, the S&P 500’s strong 23% annual performance signals that bullish momentum could persist if market fundamentals hold. Traders should watch for support at the 50-day moving average as a key indicator of market direction in the first quarter.

More Information in our Economic Calendar.