Why is the stock market down today? 'The market can't get a firm grip'

Markets seesawed on the first trading day of 2025 as investors grappled with big questions ahead of a change of power in Washington.

U.S. stocks jumped in early trading, then zigzagged throughout the day. The broad S&P 500 closed down 13 points, or 0.2%, after trading as low as 0.9% lower midday. The Dow Jones Industrial Average was down nearly half a percent at the close, while the Nasdaq Composite Index, which contains more technology stocks, cut early losses to close just 0.2% lower, near 19,281.

“The market can’t get a firm grip,” said Michael Grant, co-CIO and head of long/short strategies at Calamos Investments, which has $40 billion in assets.

“It's easy to imagine that the second coming of Trump will amplify these extraordinary premiums that exist for U.S. risk assets,” Grant told USA Today in a midday interview. “The conundrum is that this is actually going on for a long time.”

Even though December’s “Santa Rally” fizzled , the S&P 500 gained more than 23% in 2024. Stocks have notched double-digit annual returns most years in the decade, thanks largely to strong corporate profits in many sectors of the economy and expansive fiscal policy.

Some unease about whether those trends can continue may be starting to creep into the financial markets, Grant said.

“Investors need to scale back their expectations," he added. "They need to avoid areas like Tesla, the AI narrative, and excessively valued growth stocks. Because that's where the real risk lies, particularly if interest rates stay higher for longer in 2025, which is one possible scenario.”

Shares of Tesla, Inc. lost a little more than 6% Thursday after the electric-car company announced quarterly and full-year 2024 delivery numbers that were slightly lower than those in 2023. Investors may also have been reacting to the New Year’s Day explosion of a Tesla Cybertruck , which killed the driver, and is under investigation.

Investors are also digesting the likelihood that the Federal Reserve will have to scale back its interest rate cuts – if not reverse course and hike rates at some point in 2025. The 10-year U.S. Treasury note has gained nearly a full percentage point since mid-September, when the central bank delivered its first rate cut in four years. Bonds lose their value, making yields rise, when inflation is higher.

Uncertainty about the future was reflected in the parts of the market that outperformed others on Thursday. Some sectors that are traditionally seen as defensive, or likely to do better in weaker economic conditions, advanced: utilities were up 0.8% and energy gained 1.2%, as calculated by the Sector SPDR family of funds .