U.S. stocks closed lower across all major indices, with the Nasdaq-100 Index (NDX) being hit particularly hard with a decline of 0.8%. This downturn was largely driven by weakness in the semiconductor sector, spurred by an investigation by Chinese regulators into NVIDIA regarding alleged anti-monopoly violations. Other sectors also faced pressure, notably Utilities and Financials, while Healthcare, Real Estate, and Materials showed some resilience. The S&P 500 index (SPX) dropped 0.61% to settle at 6,053, the NDX fell 0.84% to 21,441, the Dow Jones Industrial Average (DJIA) decreased by 0.54% to 44,402, and the Russell 2000 (RUT) dipped 0.67% at 2,393.
In the economic landscape, the New York Federal Reserve Survey indicated an increase in year-ahead inflation expectations to 3%, compared to 2.9% in October. Respondents anticipated home price gains to remain steady at 3%, while expectations regarding government borrowing were sharply reduced. Concurrently, Oracle Corp released its Q3 2024 earnings report, with adjusted earnings per share at $1.47, slightly below expectations. Revenue figures also fell short of forecasts, revealing mixed results in the cloud segment, which is crucial to Oracle’s operational strategy.
The U.S. dollar opened the week on a robust note, bolstered by weakness in the Yen and some downward movement in the Euro in anticipation of the European Central Bank’s (ECB) meeting later in the week. While the market sentiment remained cautious due to thin trading data, recent inflation expectations underscored some resilience among consumers regarding their financial outlook, which was at its highest since February 2020. The Euro continued its modest descent as it awaited potential ECB actions amid a steeper-than-expected decline in the EU Sentix Index.
The Antipodean currencies, particularly the Australian dollar (AUD), saw favorable movement fueled by the statements from China’s Politburo regarding a more proactive fiscal policy and moderately loose monetary stance for the upcoming year. The risk-on sentiment led to an increase in AUD/USD, which briefly passed 0.64 and approached its 21DMA. Meanwhile, the Chinese Yuan also showed firmness against the Dollar as market sentiment improved with talks of impending stimulus measures and a positive consumer price index report, marking a shift in China’s economic policy stance for the first time since 2011.
In the bond market, Treasury notes experienced a sell-off, which led to bear steepening of the yield curve, as investors shifted their focus toward upcoming economic indicators such as the Consumer Price Index (CPI). This sentiment was layered with anticipation of new issuances in the 3, 10, and 30-year Treasury securities over the coming week. The impending CPI release is pivotal for discerning inflation trends and potential Federal Reserve policy adjustments.
The commodities markets also displayed a firm start, particularly in oil prices, which were buoyed by developments from the Chinese Politburo and worsening geopolitical tensions in the Middle East. The instability stems from recent upheavals within the Syrian regime, adding to concerns over oil supply and pricing dynamics. The ongoing conflicts are further complicated by China’s recent restrictions on drone supplies critical to Ukraine, which could escalate trade tensions with the U.S. and Europe, effectively extending the technology war into a more comprehensive geopolitical conflict.