Stocks opened lower Monday as investors took profits following another red-hot year. Today's decline puts the Santa Claus Rally at risk – which could signal a tougher start to the new year.
At the close, the blue-chip Dow Jones Industrial Average was down 0.5% at 48,461 and the tech-heavy Nasdaq Composite was 0.5% lower at 23,474. The broader S&P 500 shed 0.4% to finish at 6,905.
With today's loss, the S&P 500 is now down 0.06% since the December 23 close – the official start of this year's Santa Claus Rally.
According to LPL Chief Financial Strategist Adam Turnquist, negative returns during the seven-day period that encompasses the Santa Claus Rally – the last five trading days of the year and the first two of the new year – have corresponded with an average January loss of -0.1% and an annual return of 6.1% since 1950.
Meanwhile, positive returns during this seasonal time frame have resulted in an average January gain of 1.4% and a higher full-year return of 10.4%.
Since 1950, the S&P 500 has averaged a gain of 1.3% during this seasonal period.
Tech sector drags in final stretch of 2025
Tech stocks were one of the biggest drags on the main indexes on Monday. The technology sector, as measured by the State Street Technology Select Sector SPDR ETF (XLK), shed 0.4% as several Magnificent 7 stocks tumbled.
Nvidia (NVDA, -1.2%) and Tesla (TSLA, -3.3%), which failed to make the list of this year's hottest S&P 500 stocks, led the losses for the mega-cap names, while Amazon.com (AMZN, -0.2%), Meta Platforms (META, -0.7%) and Microsoft (MSFT, -0.1%) all closed lower.
Apple (AAPL, +0.1%) and Alphabet (GOOGL, +0.02%) bucked the trend to finish in positive territory.
"Any day that … the Magnificent 7 are in the red tends to be a down day," notes Louis Navellier of Navellier & Associates.
Still, the tech sector remains on pace to finish 2025 with impressive gains, up more than 25% for the year to date. "The profit-taking is clearly seen" in today's price action, says Navellier.
Caterpillar has room to run
Caterpillar (CAT) also got hit with some profit-taking on Monday. Shares of the construction equipment giant are up nearly 60% on a price basis for the year to date, putting CAT on pace to finish as the best Dow Jones stock of the year.
And while the blue chip stock slipped 0.7% today, plenty of analysts think there's more room to run in the new year.
"Caterpillar is a global market share leader in each of its major product lines: unique in breadth of offering, dealer network, and field population," writes Truist Securities analyst Jamie Cook in a recent note, adding that the company's products "are best-in-class and known for quality, durability, and performance."
Cook has a Buy rating and $729 price target on CAT – representing implied upside of 26% to current levels – saying Caterpillar remains "an underappreciated play on data centers and power generation."
What's more, CAT is a top stock pick for income investors, with Cook expecting the company to generate "robust cash flow" in the range of $7.5 billion to $15 billion. And Caterpillar will likely return the majority to shareholders through share repurchases and dividends, she adds.
