U.S. stocks pulled back on Monday, reversing some of the gains from last week’s rally as commodities like bitcoin faced significant declines. The S&P 500 fell by 0.4%, interrupting its five-day winning streak, while the Dow Jones Industrial Average dipped 204 points, also down 0.4% as of 10:15 a.m. Eastern time. The Nasdaq composite experienced a slightly steeper decline, shedding 0.5%.
Last week’s market upswing was fueled by expectations that the Federal Reserve might cut its main interest rate during its upcoming meeting, a measure traders now see as nearly 88% likely, according to CME Group data. However, on Monday, long-term Treasury yields climbed, influenced by comments from the Bank of Japan regarding potential interest rate hikes. Rising yields can divert investment from stocks and cryptocurrencies to bonds, affecting markets overall, especially high-value assets.
Bitcoin, once buoyant at around $125,000 in October, fell below $86,000, marking a decrease of over 5% from the previous day. This dip had a cascading effect on cryptocurrency-associated stocks, with Coinbase Global losing 3.7% and Robinhood Markets dropping 4.6%. Furthermore, Strategy, formerly MicroStrategy, experienced an 8% decrease after announcing it had raised $1.44 billion in U.S. dollars via stock sales to manage obligations related to dividends and debt.
Despite the overall downturn, Synopsys saw a positive response with a 3.9% gain after Nvidia announced a $2 billion investment in the company as part of a broader partnership. Nvidia, a significant stock in the current market, initially faltered but managed to close up 0.9%.
Retail activity showed mixed results while starting strong for the holiday shopping season. Analysts anticipated consumer spending during Black Friday and Cyber Monday would surpass expectations amid economic uncertainty. Amazon saw a modest increase of 0.4%, while Best Buy’s stock fell 1.9%.
Globally, stock markets had varied performances. France’s CAC 40 fell 0.3%, influenced largely by Airbus’s 5.1% drop after the company reported software issues with its A320 passenger jets, leading to minor travel disruptions. Meanwhile, Japan’s Nikkei 225 dropped 1.9% due to concerns over potential interest rate hikes, as inflation rates outsized the Bank of Japan’s objectives.
In the bond market, the yield on the 10-year Treasury rose to 4.08%, up from 4.02% on Friday. This increase came after a report indicated that activity among U.S. manufacturers had contracted more than expected last month. Manufacturers are cautious, focusing on managing their workforce rather than expanding hiring, amid ongoing challenges posed by tariffs and supply chain uncertainties.
As markets grapple with a mix of optimism and caution, the upcoming consumer spending reports and Federal Reserve decisions will be closely watched by investors looking for signs of stability and growth in the economy.