1. Moving the market

This morning, the major indexes declined, with the Dow Jones Industrial Average marking its first 9-day losing streak since 1978. This streak began after the index surpassed the 45,000 level for the first time earlier this month.

Traders attribute these losses to a rotation from “old” economy stocks to the new technology sector. However, Nvidia, which was recently added to the Dow, also struggled, dipping into correction territory yesterday and losing an additional 1.2% today.

Conversely, Broadcom has emerged as a new tech favorite, reaching new highs on Monday, while Alphabet, Apple, and Tesla also hit record levels.

Today’s market pullback was anticipated ahead of the Federal Reserve’s decision on interest rates. Wall Street remains concerned that the Fed might make a policy error, potentially leading to a market blow-off top or accelerating inflation.

The US macroeconomic data index suffered another blow today, with negative reports on core retail sales, industrial production, and capacity utilization affecting the market and driving away bullish investors.

The major indexes retreated further, with the breadth indicator worsening for the 12th consecutive day, marking the second-longest stretch of weakness in 100 years. This indicates that market advances are being driven by only a few stocks, with the majority not participating.

While Nvidia nears a 13% drawdown from its highs, Bitcoin is testing new record levels. Bond yields reversed yesterday’s rally, the dollar remained in a tight range, and gold dipped below its 50-day moving average.

Will tomorrow’s Fed decision on interest rates lift the equity markets out of their current slump?

1. Moving the market

The major indexes started the week on a positive note, with two out of three heading higher, led by the Nasdaq. However, AI chip powerhouse Nvidia did not participate in the upswing and slipped into red territory.

The Federal Reserve will commence its final FOMC policy meeting of the year tomorrow, with results to be announced on Wednesday. A 0.25% rate cut is anticipated, but traders will be keenly watching for any changes to forward guidance, especially given the recent worsening of inflation numbers. The ongoing discussion revolves around whether these numbers signify the beginning of a new trend.

While the S&P 500 continues to inch higher, underlying indicators paint a less optimistic picture. As highlighted by ZH, market breadth, which measures advances versus declines, has worsened for 11 consecutive days.

Mega Cap stocks are showing prolonged strength to the upside. However, tech darling Nvidia plunged into correction territory today, down over 12% from its record high. In contrast, Broadcom surged higher, joining the $3 trillion club.

Bitcoin underwent a rally over the weekend and surged this morning, nearing $108,000 before pulling back. Its ratio to gold also reached record levels, with one Bitcoin now equivalent to 40 ounces of gold.

Bondholders have faced continuous challenges, with yields rising for the seventh consecutive day. Meanwhile, the dollar ended a six-day winning streak by dipping slightly lower, and gold followed suit but found support at $2,650.

Traders are hopeful for a rate cut but also question its wisdom given the current market levels and overall economic conditions.

Are the released data points indeed accurate?

1. Moving the market

Following yesterday’s CPI report, traders were met with the release of the Producer Price Index (PPI) this morning, which showed a hotter-than-expected 0.4% price increase last month, compared to the anticipated 0.2%.

This year-over-year rise pushed prices up by 3.0%, the highest since February 2023, with food costs leading the surge, rising at their fastest pace since November 2022. The core PPI also saw a significant year-over-year increase to 3.4%, marking its worst performance since February 2023.

As a result, the major indexes tumbled, unable to build on the previous day’s gains. Despite this, traders remain optimistic that the Federal Reserve will proceed with a 0.25% rate cut in December, citing other recent inflation data that has shown positive trends. However, surging debt and deficits remain a concern.

The US Inflation Data Surprise Index has been climbing since the Fed began its rate-cutting cycle, while the US Macro Surprise Index has declined amid rising jobless claims.

Consequently, the dollar continued its upward trajectory, while stocks, cryptocurrencies, bonds, and gold all took a hit for the day.

Bitcoin briefly climbed above $102,000 early in the session but fell back below the $100,000 mark. Bond yields rose, gold retreated but held its $2,700 level, and crude oil experienced volatility, ending the session slightly in the red.

Will this week’s data points influence the Fed’s upcoming decision?