US equity indexes experienced declines, primarily influenced by setbacks in the communication services sector. Investors opted to consolidate their positions prior to the release of inflation data this week, which will provide insights into the current price pressures faced by consumers and businesses. The S&P 500 declined by 0.4% to close at 6,066.8, while the Nasdaq Composite fell 0.5% to 19,762.5.
The Dow Jones Industrial Average also took a hit, dropping 0.2% to 44,573.8 by midday on Monday. Notably, the S&P 500 and Nasdaq had previously recorded consecutive gains over the past three weeks, achieving multiple record highs. Despite the downturn, energy and materials sectors led the intraday gains, while the utilities sector was noted as one of the steepest decliners. Key economic reports on inflation are set to be released this week, including consumer price and producer price indexes for November.
The consumer price index (CPI), expected on Wednesday, will precede the Federal Reserve's meeting scheduled for December 17-18, and could potentially influence the bank's monetary policy trajectory, as indicated in a research note from D.A. Davidson. The producer price index (PPI) is slated for release on Thursday. As of Monday morning, the FedWatch Tool indicated that the likelihood of a 25 basis-point rate cut in December stood at 86%, an increase from 62% reported a week prior.
Projections extend to December of the following year, showing the highest probability of the Federal Reserve lowering its target rate to between 3.75% and 4%, suggesting limited cuts from the current rate levels. In bond markets, most US Treasury yields rose during the session, with the 10-year yield up by 3.8 basis points to 4.19% and the two-year yield climbing 2.6 basis points to 4.12%. In precious metals, gold prices increased by 1.2% to $2,690.11 per ounce, while silver rose 3.7% to $32.75 per ounce. On the corporate front, China’s State Administration for Market Regulation has initiated an investigation into Nvidia ($NVDA) over suspected breaches of anti-monopoly laws, as reported by Bloomberg.
This development resulted in Nvidia shares falling by 2.3% intraday, marking it as one of the worst performers on the Dow. Advanced Micro Devices ($AMD) continues to face limited market share growth due to heightened competition in artificial intelligence from Nvidia’s 'dominance' and an increasing preference from cloud services for custom chips produced by Marvell Technology ($MRVL) and Broadcom ($AVGO), according to BofA Securities.
Shares of Advanced Micro decreased by 4.6% during intraday trading, placing it among the poorest performers on the Nasdaq. In merger activities, Mondelez International ($MDLZ) is in discussions to acquire Hershey ($HSY), a deal that could create a combined sales entity nearing $50 billion. Following this news, shares of the chocolate manufacturer surged by 14% intraday, becoming the top performer on the S&P 500. In a significant acquisition, Arthur J.
Gallagher ($AJG) has agreed to purchase the insurance brokerage AssuredPartners in a cash deal valued at approximately $13.45 billion. Further insights reveal that West Texas Intermediate crude oil futures jumped by 2% to $68.56 per barrel. In economic policy news, China’s Politburo announced a commitment to loosen monetary policy for the first time in 14 years, as reported by the New York Times.
This move aims to stimulate the economy amidst disinflationary pressures and evolving trade relations influenced by President-Elect Donald Trump's intentions to impose significant tariffs on China. A Politburo statement signifies a shift to a 'moderately loose' policy from the previously employed 'prudent' stance, which has been in effect since December 2010.
This transition is pivotal as growth in demand within the world's largest oil importer has shown signs of slowing..