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11.12.2024 12:48 PM
Wall Street indices closed lower on Tuesday as losses in the technology sector offset gains in communication services, while investors awaited key inflation reports that could influence the Federal Reserve's next interest rate decisions.
On Tuesday, major Wall Street indices ended trading lower. The technology sector came under pressure, which neutralized slight growth in the communications services sector. Investors are waiting for crucial inflation reports that could sway upcoming decisions by the Federal Reserve (Fed) on interest rates.
Amid anticipation of November's Consumer Price Index (CPI), only three out of eleven key sectors of the S&P 500 showed growth. The report, scheduled for Thursday, will be one of the last key indicators for the Fed ahead of its December 17–18 meeting. Analysts predict that inflation in November accelerated slightly to 2.7% compared to 2.6% in October.
"There's a sense of anticipation in the market ahead of this week's CPI and PPI data," said Mona Mahajan, Chief Investment Strategist at Edward Jones. According to her, investors want to see numbers that won't force the Fed to take aggressive measures at its meeting.
If CPI aligns with estimates, the Fed is likely to reduce rates by 25 basis points next week. Traders see an 86% chance of this happening, according to CME's FedWatch tool.
Pressure on rates increased after Friday's news of rising unemployment coupled with a slower recovery in job growth for October.
Highlighting that the S&P 500 has risen about 27% for the year, Lindsay Bell, Chief Strategist at 248 Ventures in Charlotte, North Carolina, noted that investors remain cautious ahead of economic data releases and the Fed meeting.
The upcoming week will be pivotal for markets. The CPI report and the Fed's reaction will set the tone for subsequent movements on Wall Street. Investors are eagerly awaiting signals that could confirm or challenge their hopes for slowing inflation and rate cuts.
Investors remain focused on potential steps by the U.S. Federal Reserve. After hints from Fed officials last week about slowing the pace of monetary policy easing, investors are looking for signs that the regulator may pause in January. These expectations arise amid a resilient economy that continues to show strength in challenging conditions.
By the close of trading on Tuesday, the Dow Jones Industrial Average fell by 154.10 points (-0.35%), finishing at 44,247.83. The S&P 500 lost 17.94 points (-0.30%) to close at 6,034.91, while the Nasdaq Composite also slipped, dropping 49.45 points (-0.25%) to end at 19,687.24.
The communication services sector posted the largest gain among S&P 500 sectors, rising 2.6%. This growth was driven by a 5.6% surge in shares of Google's parent company, Alphabet, after it unveiled a new chip.
However, not all sectors fared as well. The real estate sector fell 1.6%, making it the day's biggest percentage decliner. The technology sector also experienced significant losses, dropping 1.3%. Oracle shares fell 6.7%, weighing heavily on the sector after the cloud computing giant missed Wall Street's second-quarter expectations.
Investors are anxiously watching for developments, hoping for more clarity after the release of economic data and the Fed's comments. The current state of the market reflects a balance between expectations and reality, further intensifying the importance of upcoming regulatory decisions.
Against the backdrop of mixed trading results and expectations of a Fed policy slowdown, the market continues to oscillate. Positive signals from individual companies and sectors are offset by overall tension and uncertainty. The coming weeks will be critical in shaping new trends on Wall Street.
On Tuesday, the Philadelphia Semiconductor Index fell 2.5%, primarily due to news of an antitrust investigation against Nvidia initiated by Chinese authorities. Analysts widely interpreted this as Beijing's response to U.S. restrictions on the chip manufacturing sector. Pressure on the tech sector continues to mount, adding additional risks for companies operating in international markets.
Shares of Walgreens Boots Alliance became the day's standout performer, soaring 17.7%. The surge was triggered by reports that the company is in talks with private equity firm Sycamore Partners regarding a potential sale. The prospect of a buyout injected new life into the company's stock.
At the opposite end of the S&P 500, Moderna Inc. saw its shares tumble 9.1%. This drop came after Bank of America resumed coverage of the company with an unfavorable "underperform" rating. This was a significant blow to the biotech giant, given its recent successes.
Among the day's winners was Alaska Airlines, whose shares climbed 13% following an improved fourth-quarter profit forecast. Analysts highlighted improved operational metrics as a key growth driver.
Boeing also gained 5.5%, buoyed by news that production of its 737 MAX aircraft resumed last week. This move raised expectations for the aircraft manufacturer to recover its position after years of challenges.
However, not all corporate updates led to stock gains. MongoDB, a software solutions company, saw its shares drop 16.9%, despite raising its annual forecast. Investors either took profits or doubted the company's growth prospects.
The market ended the day with clear contrasts: successes of individual companies could not offset the overall pressure caused by geopolitical and economic factors. Investors continue to analyze not only local data but also international developments shaping the global agenda.
Shares of luxury homebuilder Toll Brothers fell 6.9% after releasing quarterly results that exceeded analysts' expectations. However, the company's weaker forecast for the current quarter sparked a wave of sell-offs. Despite strong financial results, a cautious outlook on the future dampened market enthusiasm.
On the New York Stock Exchange, declining stocks outnumbered gainers by a ratio of 1.88 to 1. Meanwhile, 117 stocks hit new highs, and 42 touched new lows.
On Nasdaq, the situation was even tenser: 1,655 stocks ended the day in positive territory, while 2,671 declined. The ratio here was 1.61 to 1. The Nasdaq Composite recorded 87 new 52-week highs and 86 new lows.
Total trading volume on U.S. exchanges reached 13.35 billion shares, below the 14.35 billion average for the last 20 sessions. This highlights the restraint among market participants amid uncertainty and anticipation of key inflation data.
European stock indices also came under pressure. The STOXX 600 Index fell 0.2%, further retreating from a seven-week high reached earlier this week. Pessimistic corporate reports in the region intensified the decline.
Asian investors showed similar caution, reflected in widespread declines in stock markets. Concerns are growing that U.S. inflation data could influence the Federal Reserve to reassess rates.
The U.S. dollar hovered near a two-week high, reflecting increased demand for safe-haven assets. This underscores investors' concerns about potential economic surprises.
While markets exhibit volatility and reduced activity, all eyes remain on the coming days. Key inflation data and the Fed's statements will serve as critical triggers shaping market movements.
The Chinese yuan weakened by 0.3%, reaching 7.2803 per dollar, following reports that Beijing is considering adopting a weaker currency policy next year. This move is aimed at mitigating potential higher tariffs from other countries.
The yuan's decline triggered a ripple effect across Asian markets. The South Korean won, along with the Australian and New Zealand dollars, which are sensitive to Chinese economic signals, also fell against the U.S. dollar.
The Canadian dollar continued its decline, nearing 1.4165 per U.S. dollar. On Tuesday, it reached a 4.5-year low, and Wednesday's trends confirmed this trajectory.
Traders estimate an 89% probability of a significant 50 basis point rate cut by the Bank of Canada. This would extend the current easing cycle, which has already led to a 125-basis-point reduction. Last week's news of unemployment climbing to an eight-year high of 6.8% has solidified market expectations for further easing, which would bring the overnight rate to 3.25%.
Broadly, currency movements were moderate. The euro fell 0.2% to $1.051, reflecting slight softness amid relative stability in the European economy. The Japanese yen also remained steady, trading at 151.53 per dollar.
Currency markets display mixed dynamics: Asian currencies and the Canadian dollar are losing ground amid political and economic factors, while major global currencies remain stable. Investors are closely monitoring developments, evaluating the potential for further monetary policy changes by leading central banks.
European markets are bracing for a significant move from the European Central Bank, with a rate cut on Thursday already priced in. Traders also estimate a 61% chance of the Swiss National Bank lowering its rate by 50 basis points. Such a move could help curb the Swiss franc's appreciation, which pressures the country's exports.
The Australian dollar weakened by 1%, reaching $0.6372. This decline followed the Reserve Bank of Australia's decision to leave rates unchanged. Although this aligned with analyst expectations, the central bank abandoned its earlier hints of potential future rate hikes. This caused a sharp market reaction, driving the currency lower.
Amid major economic shifts in China, oil markets responded with gains. Brent crude futures rose by 0.3%, reaching $72.38 per barrel. China's policy dynamics have instilled optimism among traders, who expect increased energy demand.
Global markets continue to closely watch central bank actions and major economic changes. Decisions in Europe, Switzerland, and Australia significantly impact currencies, while China's policies demonstrate its ability to support commodity markets. In the coming days, market participants will focus on investor reactions and potential economic signals that could shape future trends.
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*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
