(Dec 1): US stocks entered December in a cautious mood, pressured by a renewed slide in cryptocurrencies and rising bond yields after the Bank of Japan signaled it may soon tighten its policy.
The S&P 500 declined 0.6% and the tech-heavy Nasdaq 100 Index fell 0.8% as of 9.31am in New York, while the Cboe Volatility Index hovered at around 18. The Magnificent Seven stocks were also weaker, with Meta Platforms Inc and Nvidia Corp each down more than 1%.
Stocks exposed to cryptocurrencies fell as Bitcoin dropped to around US$86,000, dragging major tokens lower. Shares of Coinbase Global Inc and MARA Holdings Inc are down at least 5% each.
“The renewed decline in Bitcoin could create some real problems for the stock market,” Matt Maley, chief market strategist at Miller Tabak + Co wrote, adding that much of the crypto asset’s movement is depending on net liquidity.
In other asset classes, US-listed silver miners rose as the precious metal extended Friday’s rally on tight supply. Gold miners were also higher across the board. Oil stocks posted small gains as crude prices rose after a pipeline carrying Kazakh crude to Russia’s Black Sea coast halted loading after one of its moorings was damaged in an attack.
Traders are bracing for a slew of economic data ahead of the Federal Reserve’s next policy meeting, including manufacturing data after the opening bell, an outdated print on personal consumption and November’s ADP private payrolls report.
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Despite Monday’s risk-off sentiment, Wall Street remains bullish on US stocks. RBC Capital Markets strategists led by Lori Calvasina predicted that the S&P 500 index would rise by more than 10% for a fourth straight year, the latest Wall Street Bank to issue a bullish forecast.
If history is any guide, seasonal patterns can be supportive for equities. Since 1990, the S&P 500 has delivered its second-best average return in December, its second-lowest volatility and the highest frequency of monthly gains, according to Sam Stovall, chief investment strategist at CFRA. Notably, mid- and small-cap indices have typically outperformed large caps.
Traders are already placing bullish bets on small-cap stocks even though the shares have struggled to outperform their larger peers over the past year. The total amount of outstanding call contracts on the iShares Russell 2000 ETF, the largest exchange-traded fund tracking the index, jumped to the highest level since September when compared with open interest in put options, signaling investor optimism that the rally is set to continue.
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Market attention is also drifting to the Fed’s upcoming leadership change after President Donald Trump said he decided on his pick for the next chair after making clear he expects his nominee to deliver interest rate cuts.
Among corporate news, shares of vaccine makers are falling after William Blair flagged reports of a memo from a top FDA official that linked Covid-19 vaccines in younger people to deaths associated with myocarditis.
Barrick Mining Corp is exploring an initial public offering of its North American gold assets as the Canadian miner grapples with a period of upheaval, including mining setbacks and management changes. And, shares of Synopsys Inc soared after Nvidia Corp struck a deal to invest US$2 billion into the chip-design software maker.
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