- Nvidia fell 2.5% after reports that China was investigating the company.
- AMD dropped 5.7% after BofA Global Research downgraded the stock’s rating.
- Markets are awaiting the US CPI report.
Equities fell on Monday, led by a decline in tech stocks like Nvidia and Advanced Micro Devices. Meanwhile, market participants were cautious as they eagerly awaited the US consumer inflation report for more clues on the outlook for US monetary policy.
Nvidia fell 2.5% after reports that China was investigating the company for violating antimonopoly laws. Meanwhile, Advanced Micro Devices dropped 5.7% after BofA Global Research downgraded the stock’s rating. Tech stocks, especially AI, have driven equities higher in recent months despite high borrowing costs in the US. Therefore, a drop in the major tech stock can sour market sentiment.
US nonfarm payrolls (Source: Bloomberg)
The decline on Monday followed a record closing for stocks on Friday due to upbeat earnings forecasts and increased Fed rate cuts bets. Data on Friday revealed that the US economy added 224,000 jobs, above estimates of 195,000. This figure showed a surge in job growth from the previous month, when there were only 12,000 new jobs.
However, the report also revealed that the unemployment rate rose from 4.1% to 4.2%, indicating cracks in the labor sector. Higher unemployment is a sign that demand for labor has dropped. Therefore, markets raised the likelihood of a December Fed rate cut from 70% to 85%. Lower borrowing costs spur economic growth, boosting equities.
Meanwhile, policymakers maintained their cautious tone due to the continued resilience of the US economy. On Friday, Michelle Bowman emphasized the need for caution with rate cuts, noting that inflation risks remained. These remarks followed Powell’s, in which he also noted the risks of a robust economy.
The Fed will likely assume a more cautious approach to rate cuts in 2025 when Trump assumes office. Experts believe his policy proposals will increase inflation. Notably, a University of Michigan consumer sentiment report last week revealed that inflation expectations for the next year have risen.
Meanwhile, traders remain cautious ahead of the US Consumer Price Index report due on Wednesday. According to forecasts, inflation increased by 0.3% in November, above the previous 0.2% increase. On an annual basis, inflation might increase by 2.7%, edging further away from the Fed’s target. An upbeat report will lower Fed rate cut bets, hurting equities. On the other hand, an upbeat report will increase expectations for a December cut.
