Market Rally Cools as Post-Election Momentum Shows Signs of Fatigue

Financial markets pulled back Thursday as the robust rally following the presidential election continued to lose steam.

The S&P 500 declined 0.6%, hovering near its record peak reached earlier this week. The Dow Jones Industrial Average shed 207 points, or 0.5%, while the Nasdaq composite retreated 0.6%.

What You Need To Know

• The S&P 500 retreated 0.6% Thursday

• The Dow Jones Industrial Average fell 0.5%, and the Nasdaq composite declined 0.6%

• Market segments that had surged most dramatically after the election reversed course and led the downward trend

• Tesla recorded only its second negative session since Election Day, while small-cap stocks underperformed the broader market

Technology giant Cisco Systems dropped 2.1%, weighing on market sentiment, despite reporting quarterly earnings that exceeded analyst expectations. Market observers suggested investors may have anticipated more aggressive forward guidance.

The broader market's ascent has outpaced corporate earnings growth, amplifying concerns among market skeptics about elevated valuations. The S&P 500 maintains a impressive gain of nearly 25% year-to-date, following last year's substantial 24.2% advance.

Several election-driven momentum trades lost ground. Tesla shares declined 5.8%, marking just its second down day since the election results. The company's chief executive, Elon Musk, has established strong ties with the administration.

Small-cap stocks experienced steeper declines than their larger counterparts, with the Russell 2000 index dropping 1.4%. This marks a shift from the post-election environment, when investors bet that the "America First" agenda would disproportionately benefit domestic-focused enterprises over multinational corporations potentially exposed to trade tensions.

Despite Republican control of both executive and legislative branches, which could facilitate policy implementation, UBS Global Wealth Management's Americas CIO Solita Marcelli notes that "campaign promises may face modification during the legislative process, with final bills likely representing scaled-back versions of initial proposals."

Market dynamics were also influenced by volatile bond yields following stronger-than-anticipated economic data and Federal Reserve Chairman Jerome Powell's commentary. While the Fed recently enacted its second rate cut this year to support economic growth, investors remain focused on future policy direction.

Powell's remarks suggested patience in monetary policy, stating, "The economy is not signaling an urgent need for lower rates. Current economic strength allows us to approach policy decisions methodically."

The two-year Treasury yield, a key indicator of Fed policy expectations, increased to 4.35% from Wednesday's 4.28%.

Earlier reports showed October's wholesale prices rose 2.4% year-over-year, accelerating from September's 1.9% and exceeding economist forecasts.

Labor market data remained robust, with weekly jobless claims declining, indicating stable employment conditions.

The benchmark 10-year Treasury yield fluctuated before settling at 4.45%, unchanged from the previous session.

In notable stock movements, Super Micro Computer plunged 11.4%, ranking among the S&P 500's biggest decliners after announcing a delay in quarterly financial reporting.

The AI-driven server manufacturer, previously a market darling, has faced recent challenges, particularly following Ernst & Young's resignation as auditor. However, a board committee's three-month investigation concluded "no evidence of fraud or misconduct by management or the Board of Directors."

Walt Disney provided some market support, gaining 6.2% after beating profit expectations. CEO Robert Iger highlighted improved streaming performance and strong box office results from releases including "Inside Out 2" and "Deadpool & Wolverine."

Luxury retailer Tapestry surged 12.8% following the termination of its planned merger with Capri. The $8.5 billion deal combining Coach and Michael Kors brands faced regulatory hurdles, including FTC opposition on antitrust grounds.

Capri shares advanced 4.4%.

Dutch semiconductor equipment manufacturer ASML offered positive sector outlook, projecting global chip sales to exceed $1 trillion by 2030, driven by AI demand, while maintaining long-term guidance. Its U.S.-listed shares gained 2.9%.

By session end, the S&P 500 fell 36.21 points to 5,949.17. The Dow lost 207.33 to 43,750.86, and the Nasdaq declined 123.07 to 19,107.65.

Overseas, European markets advanced, with Germany's DAX rising 1.4%. Asian markets showed mixed results, as Hong Kong's Hang Seng dropped 2% while South Korea's Kospi edged up 0.1%.