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Markets Retreat as Tech Shares and Bond Yields Shift

2023.12.05

 

Key Takeaways

  • Major U.S. stock indexes and bond yields reversed gains, with tech stocks like Nvidia and Microsoft seeing notable declines.
  • The Russell 2000 index defied market trends by finishing 1% higher, indicating investor optimism.

Tech Stocks Lead Market Pullback

The stock market experienced a downturn, led by a decline in shares of large technology companies. The Nasdaq Composite dropped 0.8%, while the S&P 500 and the Dow Jones Industrial Average saw respectively 0.5% and 0.1% declines. This shift ended a four-day winning streak for the Dow, influenced by falling shares in key tech players like Nvidia, Microsoft, and Amazon.

Bond Yield Increases Impact Markets

The bond market also reversed its recent trend, with the 10-year Treasury yield climbing to 4.286%. This rise in yields, particularly noticeable in the two-year Treasurys, came after a significant drop the previous week. Investors are now considering the possibility of the Federal Reserve cutting interest rates by more than a percentage point in 2024, following November’s bond yield declines that buoyed the stock market.

Economic Indicators and Bitcoin’s Surge

The market is awaiting upcoming economic reports for further direction, including this week’s jobs data and next week’s inflation numbers. Surprisingly, the Russell 2000 index of small-cap stocks went against the broader market trend, finishing 1% higher, signaling continued investor optimism. Additionally, Bitcoin saw a significant rise, reaching its highest level since April 2022, fueled by expectations of an ETF approval.

Corporate Movements and Gold’s Rally

In corporate news, Uber Technologies’ shares rose following the announcement of its inclusion in the S&P 500 index. Spotify also saw its shares jump after announcing layoffs. Meanwhile, Alaska Air’s decision to acquire Hawaiian Airlines led to a significant surge in Hawaiian’s stock and a decline in Alaska Air’s. Gold prices benefited from falling real interest rates, hitting an intraday record before settling at a high price per troy ounce.

International Market Trends and Oil Prices

Internationally, markets mainly weakened, with Europe’s Stoxx 600 and Asian indexes like Japan’s Nikkei and China’s Shanghai Composite closing lower. However, India’s S&P BSE Sensex reached a record high following political victories for Prime Minister Narendra Modi’s party. The oil market continued its recent decline, with Brent crude dropping, while cruise line stocks like Norwegian Cruise Line and Royal Caribbean Group gained from the falling oil prices.

 

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