Global stock markets mostly dipped Tuesday, the first trading day of the year, as a global equity rally stumbled on concerns traders had been too optimistic in the final days of 2023. 

Stock markets soared to new heights in the final months of last year in New York, Frankfurt, Paris, and Tokyo, as investors piled into equities in anticipation of interest rate cuts, which can make stocks more appealing to hold.

But the rally did not extend into the new year, as investors in many markets pulled back.

"One of the concerns we have is that investors were extremely bullish going into this year, and we just think perhaps that was setting up for some disappointment" Jack Ablin, chief investment officer at Cresset, told AFP.

"We expect a modest pullback," he added, noting "we just got a little overbought on the investor enthusiasm."

On Wall Street, the Nasdaq Composite Index slumped 1.6 percent while the broad-based S&P 500 lost 0.6 percent. 

The Dow Jones Industrial Average was one of the few bright points, inching up 0.1 percent.

'Performance chasing'

In Europe, most major stock indexes also slipped, although the DAX in Frankfurt notched a small gain. 

Market participants have "recognized that there was some performance chasing at the end of 2023 and that some profit taking was bound to happen in the wake of a parabolic advance," said Briefing.com analyst Patrick O'Hare.

Nevertheless, investors retain a positive outlook, according to analysts.

"There remains an increasing belief that (Federal Reserve) rate cuts, which have bullishly marked all capital market trends in the last eight weeks, are still fully ingrained in stock market sentiment," said SPI Asset Management's Stephen Innes.

He added that there was a question on how investors would reconcile the difference between market expectations of 150 basis points of cuts and the Fed's forecast of 75.