Wall Street slides from recent highs as megacaps weigh

NEW YORK – US stocks dipped from recent highs on Dec 4, with investors turning cautious ahead of employment data due this week that could alter expectations that the Federal Reserve will cut interest rates early next year.

All three major indexes receded, with megacaps Microsoft , Apple, Nvidia and Amazon dropping between 1 per cent and 3 per cent, pressured by higher US Treasury yields, which made returns on stocks less attractive.

Wall Street has rallied in recent weeks, buoyed by robust corporate earnings and expectations that the Fed will start cutting rates as soon as March.

The S&P 500 registered its highest close of the year on Dec 1 as remarks from Fed Chair Jerome Powell acknowledged the central bank’s need to “move forward carefully” amid signs of economic softening, comments that bolstered expectations the Fed has finished raising rates.

Small-cap stocks rose on Monday, with the Russell 2000 up 0.65 per cent, bringing its gain this year to over 6 per cent, far less than the S&P 500‘s 19 per cent recovery over the same period.

“There is a lot of chop around here that is not necessarily meaningful,” said Tom Martin, a senior portfolio manager at GLOBALT Investments in Atlanta.

“We have a really important Fed meeting coming up, and what makes it important is that all of a sudden, the market has decided that they’re going to cut early next year.”

Ride-hailing service Uber Technologies rallied 3.4 per cent after an announcement on Friday it will join the S&P 500 effective Dec 18.

Shares of Alaska Air Group tumbled 15 per cent after the carrier said on Sunday it would acquire peer Hawaiian Holdings for US$1.9 billion (S$2.54 billion), including debt. Hawaiian’s shares nearly tripled in value, helping lift the Russel index.

This week’s main macroeconomic focus will be Friday’s jobs report for November, which may help investors gauge the Fed’s likely interest rate path, as well as the potential for a “soft landing” – where the Fed manages to bring inflation under control while averting a recession.

Traders widely expect the central bank will keep rates unchanged at its meeting next week. Interest rate futures suggest a 58 per cent probability the Fed will start cutting rates by March 2024, according to the CME Group’s FedWatch tool.

However, some analysts warn that markets have been too quick to price in lower interest rates.

Of the 11 S&P 500 sector indexes, seven declined, led lower by communication services, down 1.7 per cent, followed by a 1.55 per cent loss in information technology.

The S&P 500 was down 0.70 per cent at 4,562.68 points.

The Nasdaq declined 1.09 per cent to 14,149.33 points, while the Dow Jones Industrial Average was down 0.20 per cent at 36,172.89 points.

Adding to declines on Monday were renewed fears about a widening of the war between Israel and Gaza after an attack on three commercial vessels in the southern Red Sea.

Shares of cryptocurrency firms such as Coinbase Global , Riot Platforms and Marathon Digital rallied over 7 per cent as bitcoin crossed US$40,000 for the first time this year.

Declining stocks outnumbered rising ones within the S&P 500 by a 1.2-to-one ratio.

The S&P 500 posted 38 new highs and no new lows; the Nasdaq recorded 107 new highs and 53 new lows. REUTERS

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