What’s happening: US stocks closed lower on Monday amid thin trading volumes, with markets remaining closed tomorrow for the New Year holiday.
What happened: Wall Street stocks declined by around 1% on average, to their weakest level in more than a week.
Traders geared up for Donald Trump entering the White House next month and the Federal Reserve’s monetary policy outlook for 2025.
Why it matters: The Santa Claus Rally, or the historical upturn in stock markets during the holiday season, is often interspersed with profit taking. So, the movement in the US stock market was not unusual.
Moreover, higher US Treasury yields since early December weighed on the Dow Jones index and the S&P 500, setting both indices on course to recording their worst month since April. Although, the yield on the 10-year Treasury note fell on Monday, it remained close to its highest level since May.
Markets are gearing up for President-elect Donald Trump to return to the White House on January 20. Investors are bracing for inflationary pressures from Trump’s policies. In view of this, traders now expect the Fed to slow its monetary policy tightening next year, announcing its first rate cut in only in May.
Data released on Monday showed pending home sales in the US gained 2.2% in November, topping market estimates of a 0.7% rise, while the Dallas Fed’s Texas manufacturing activity index gained 6 points to reach 3.4 for December, recording its first positive level since April 2022.
Crypto-related shares, including MicroStrategy and Coinbase settled lower, following a slide in Bitcoin prices.
Most of the 11 S&P 500 sectors closed in the red, with consumer discretionary and tech stocks among the worst performers. Energy stocks bucked the overall market trend, closing slightly higher.
Big tech stocks, including Apple and Amazon, recorded losses, falling over 1% each. Boeing’s shares dipped more than 2% on Monday following news of 737-800 aircraft crash operated by Jeju Air.
The Dow Jones index dipped 418.48 points, or 0.97%, to close at 42,573.73, while the S&P 500 lost 1.07% to 5,906.94 on Monday. The Nasdaq 100 fell 1.19% to settle at 19,486.79.
The S&P 500 and Nasdaq 100 have surged around 24% and 26%, respectively, year to date, while the Dow Jones index has recorded a softer 13% gain.
US stock markets will be closed tomorrow for the New Year holiday and will also remain shut on January 9 for former President Jimmy Carter’s funeral.
What to watch: Investors await the release of manufacturing PMI, scheduled for Friday, to get some more insights into the region’s factory activity, which might impact the Fed’s interest rate decision.
Data on S&P/Case-Shiller home price index (1800 UAE Time), FHFA house price index (1800 UAE Time) and Dallas Fed services index (1930 UAE Time) will be released today. The S&P CoreLogic Case-Shiller 20-city home price index, which fell 0.3% in September, is expected to decline by 0.2% in October.
Context: The CAD/USD forex pair moved higher on Monday amid strength in crude oil prices.
Details: Data released on Monday showed the CFIB’s Business Barometer in Canada declined to 56.4 in December, versus a revised reading of 59.8 in November, which was the strongest since mid-2022.
Meanwhile, the Bank of Canada is widely expected to continue cutting interest rates to combat weak economic growth.
Strength in the price of crude oil, one of Canada’s major exports, lent support to the loonie this morning. WTI crude oil prices gained 0.6% to $71.42 per barrel.
Weakness in the US dollar also provided a boost to the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell 0.2% to 107.96 this morning.
The CAD/USD gained around 0.1% to 1.4350 this morning. The S&P/TSX Composite Index fell 0.71% to close at 24,620.59 on Monday, ahead of the employment report from the Bank of Canada in early January.
What to watch: With no major economic reports scheduled for release today, investors await the manufacturing PMI (1830 UAE Time) from Canada on Thursday. The S&P Global Canada manufacturing PMI, which rose to 52.0 in November from 51.1 in October, is expected to edge lower to 51.9 in December.
Other Markets: Asian trading indices traded mostly lower this morning, with the Asia Dow, Japan’s Nikkei 225, China’s Shanghai Composite Index and India’s Sensex down by 0.05%, 0.96%, 0.59% and 0.62%, respectively, and Hong Kong’s Hang Seng Index up by 0.37%.
Russia and Ukraine have swapped over 300 prisoners of war in an exchange deal brokered by the UAE ahead of New Year’s Eve. The news sent the safe-haven US dollar index lower in forex trading this morning.
China’s official NBS manufacturing PMI declined to 50.1 in December, from 50.3 in November. The latest reading coming in short of market estimates of 50.3 exerted pressure on the CNY/USD forex pair.
South Korea’s annual inflation rate accelerated to 1.9% in December, from 1.5% in the previous month. Inflation reaching the highest level since August sent the KRW/USD pair lower in forex trading this morning.
Cyprus posted a current account deficit of €52.9 million in the second quarter, narrower than the €285.4 million gap recorded in the year-ago period, which lent support to the EUR/USD forex pair.
Brazil’s nominal budget deficit widened to BRL 99.1 billion in November, from BRL 80.9 billion in the year-ago month. However, the BRL/USD pair rose in forex trading this morning.
India’s government budget value (1430 UAE Time) and infrastructure output (1530 UAE Time), South Africa’s balance of trade (1600 UAE Time), as well as US Redbook index (1755 UAE Time) and Dallas Fed services revenues index (1930 UAE Time).