U.S. stocks fell on Monday ahead of another wave of economic data this week.
The S&P 500 (^GSPC) was down 0.9% in early trade, while the Dow Jones Industrial Average (^DJI) was down 0.8%, or 270 points. The tech-heavy Nasdaq Composite (^IXIC) fell 0.9%.
Stocks were mixed on Friday as investors digested better-than-expected jobs data. Strong job growth and strong wage growth are the opposite of what the Fed wants to see in its fight against inflation. Data on Friday showed demand for workers remained unbalanced with supply, signaling to Fed policymakers to either raise interest rates higher than previously expected or stay in a restrictive zone for longer.
Narratives from US central bank officials are currently in a pre-meeting blackout period, suggesting they will cut rates to 50 basis points on December 12th. Four consecutive gains of 75 basis points after the 13-14 meeting. Investors are now wondering how long the central bank will continue to tighten policy, how high the federal funds rate will eventually reach, and for how long.
“What’s fascinating is that right now the market is focusing on the very real possibility that we’re going to raise rates ‘only’ 50 basis points next week, and extrapolating that level of dovishness, rather than focusing on any risk ratio that terminal rates might end up in. 5% is closer to 6%,” Deutsche Bank’s Jim Reid and colleagues wrote in a note early Monday.
Leading the economic calendar this week were new readings of the producer price index (PPI) — a gauge of prices paid for goods and services before they reach consumers — and consumer sentiment. On Monday, the ISM manufacturing index’s pace of expansion accelerated to 56.5 in November, above expectations for 53.5 in October from 54.4. In a separate report, the purchasing managers’ index (PMI) came in at 46.2 in November, down from 47.8 in October. New business activity fell at the fastest pace since May 2020.
Meanwhile, another batch of third-quarter earnings numbers is due to wrap up earnings season.
The yield on the benchmark 10-year U.S. Treasury note rose back above 3.5%, while oil prices were higher, with crude futures at $81.64 a barrel. On Sunday, OPEC+, or the Organization of the Petroleum Exporting Countries and its allies, including Russia, insisted on cutting output. The October decision was confirmed at a meeting in December. 4, ahead of the implementation of a $60 price cap on Russian-produced crude oil negotiated by the European Union, the Group of Seven and Australia.
Shares of Tesla (TSLA) fell nearly 5% in early trading after Bloomberg reported the company planned to cut production at its Shanghai factory, the latest sign of weakening demand in China.
Overseas, Asian shares rose on Monday after local authorities in China scaled back some of its strict COVID policies after last week’s public protests led to a major shift in Beijing’s pledge to a zero-COVID policy.
Elsewhere, in the crypto world, Sam Bankman-Fried said he will testify before the House Financial Services Committee after he finishes “understanding and reviewing” what happened after the collapse of FTX, the crypto exchange he founded.
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Dani Romero is a reporter for Yahoo Finance.Follow her on Twitter @daniromerotv
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