Investors on Wall Street experienced a notable uptick on Monday, driven by a surge in technology stocks and growing expectations that the Federal Reserve will implement a significant interest rate cut at its upcoming meeting on December 10, 2023. The S&P 500 index rose by 108 points, or 1.6%, while the Dow Jones Industrial Average increased by 294 points, or 0.6%. The tech-heavy Nasdaq Composite was particularly impressive, soaring by 2.7%.
Several companies focused on artificial intelligence, such as Alphabet, saw significant gains. Alphabet’s stock climbed 5.5%, buoyed by positive reception of its latest Gemini AI model, making it one of the key contributors to the S&P 500’s rally. Investors are increasingly optimistic about the potential of AI-driven businesses, even as concerns linger regarding the possibility of an AI market bubble. Notably, AI chipmaker Nvidia also rose by 2.1%.
The anticipated rate cut by the Federal Reserve has become a focal point for traders, with current estimates suggesting a nearly 80% chance of a reduction, a stark increase from 41% just days earlier, according to data from CME FedWatch. Yet, Monday’s gains were not without volatility; the S&P 500 initially surged by 1% within the first 15 minutes of trading before losing momentum momentarily.
Recent weeks have seen sharp fluctuations in stock prices, not only daily but hourly, reflecting investors’ concerns about the Fed’s potential actions on interest rates and the influx of capital into AI sectors. This environment represents a significant challenge for investors, reminiscent of uncertainties faced during the April sell-off following former President Donald Trump‘s controversial tariff announcements. Despite the turbulence, the S&P 500 remains within 2.8% of its record high reached last month.
Upcoming Economic Indicators
As the week progresses, several key economic indicators will be released, including data on wholesale inflation for September, which the U.S. government is expected to announce on Tuesday. Economists predict a 2.6% increase compared to the previous year, matching August’s inflation rate. A higher-than-anticipated figure could influence the Federal Reserve’s decision on interest rates, as lower rates could exacerbate inflation. Some Fed officials have already expressed reservations about a rate cut in December, emphasizing that inflation has consistently remained above their target of 2%.
Monday’s market performance came at the start of a shortened trading week, with U.S. markets set to close on Thursday for the Thanksgiving holiday. Following the holiday, attention will turn to the bustling Black Friday and Cyber Monday shopping events.
In terms of individual stock performances, U.S.-listed shares of Danish pharmaceutical company Novo Nordisk dropped 5.8% after it announced disappointing results from a clinical trial for its Alzheimer’s drug. Meanwhile, shares of the dating app Grindr fell 9.9% after the company disclosed it would cease negotiations with potential investors amid concerns about the funding for a buyout.
The cryptocurrency market also experienced notable fluctuations. Bitcoin traded around $87,600 after oscillating between $82,000 and $94,000 over the past week. Having peaked at nearly $125,000 last month, Bitcoin has lost over $700 billion in market capitalization since then, marking its lowest trading level since April.
International Market Reactions
Across international markets, European indexes displayed mixed results following a varied finish in Asia. The Hang Seng Index in Hong Kong surged 2%, boosted by a robust 4.7% gain in Alibaba shares, which reported strong demand for its updated Qwen AI application. Alibaba is set to release its earnings report on Tuesday.
In the bond market, U.S. Treasury yields remained relatively stable, with the yield on the 10-year Treasury dipping slightly to 4.04% from 4.06% at the end of the previous week.
As market conditions evolve, investors remain watchful for any developments that could signal shifts in economic policy or market stability.