Khaberni - U.S. stocks declined on Monday, shedding some of the gains from the previous week, coinciding with Bitcoin falling again amidst mixed reactions from global markets to the recent economic developments.
The Standard & Poor's 500 Index dropped by 0.3%, nearly breaking a five-day winning streak, while the Dow Jones Industrial Average lost 225 points, or about 0.4%, and the Nasdaq Composite Index fell by 0.4% as of 11:30 AM Eastern Time.
According to the Associated Press, analysts attribute last week’s gains partly to increasing hopes that the Federal Reserve might cut the key interest rate next week to support the slowing job market. These hopes remain, as traders bet on an 88% likelihood of a rate cut at the upcoming meeting, according to data from the CME Group.
However, long-term Treasury bond yields rose, reflecting a global increase in yields after hints from the Bank of Japan's chairman about the possibility of raising interest rates there. When bonds yield higher returns, they attract investors away from stocks and cryptocurrencies, pressuring these asset prices.
In this context, Bitcoin dropped from its previous levels around $125,000 in October to less than $86,000, recording a decline of nearly 7% from the previous day, directly impacting the shares of the cryptocurrency sector. For instance, Coinbase Global's stock fell by 5.8%, and Robinhood Markets’ stock decreased by 5.5%.
Strategy, formerly known as MicroStrategy, lost about 10.9% after raising $1.44 billion in cash rather than Bitcoin through selling stocks to cover dividends on preferred shares and interest on due debts.
On the positive side, Synopsys saw an increase of 3.5%, following the announcement of Nvidia investing two billion dollars in its shares as part of an expanded partnership. Nvidia's stock turned from an early loss to a gain of 1.2%, securing its influential position on Wall Street.
In the retail sector, market reactions to the holiday shopping season were mixed. Despite expectations of increased spending, stock results varied: Ross Stores shares rose by 1%, Williams Sonoma by 1.4%, while Best Buy shares fell by 1.4%.
Globally, indices varied, with France's CAC 40 dropping by 0.2% impacted by a 5.7% loss in Airbus. The European aviation giant announced an update for most of its fleet of 6,000 A320 passenger aircraft after a software glitch affected control systems, causing minor disruptions for passengers over the weekend.
In Japan, the Nikkei 225 fell by 1.9% amid concerns over interest rate hikes. The standard interest rate has been close to zero for years to revive the economy, while inflation is currently rising above the Bank of Japan's target of 2%.
In the bond market, the yield on the 10-year U.S. Treasury bonds rose to 4.09% from 4.02% on Friday, before temporarily slowing its rise after a report showed a contraction in U.S. manufacturing activity greater than expected, which could give the Federal Reserve more leeway to cut interest rates.
Manufacturing jobs are under pressure, as most participants in the Institute for Supply Management's survey indicated that the priority now is managing workforce rather than hiring, with ongoing impacts from tariffs on supply chains. One manufacturer described the situation as being "more challenging than during the COVID-19 pandemic in terms of uncertainty in the supply chain."
