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18.11.2024 10:38 AM
Wall Street's key indexes ended the week in negative territory. The S&P 500 and Nasdaq posted their biggest one-day losses in two weeks, driven by concerns about a slowdown in interest rate cuts and the markets' reaction to President-elect Donald Trump's first moves.
Federal Reserve Chairman Jerome Powell on Thursday outlined three key factors influencing the regulator's policy: stable economic growth, a strong labor market, and inflation above the 2% target. These conditions, he said, require the Fed to take a more measured approach to future rate decisions.
Investors have adjusted their forecasts: the probability that the rate will remain unchanged at the Fed's December meeting has risen to 42% from 14% a month ago, according to CME FedWatch. Moreover, traders have become less confident that monetary easing will resume in 2025.
On Friday, published statistics increased investor concerns. U.S. retail sales in October showed a slightly stronger growth than expected, and import prices showed a recovery. An additional factor was the previously published data indicating the stability of inflation despite the Fed's efforts.
Amid Friday's sell-off, markets ended a week in which investor sentiment changed noticeably. If Donald Trump's election was initially seen as a signal in favor of business, now attention has shifted to the risks associated with the policies of the new administration, as well as uncertainty around the outlook for inflation and monetary policy.
Trading volume on Friday was above average, which analysts attribute to partial profit-taking.
"US stocks have shown excellent results this month, but the current activity does not indicate panic fixing. These are more signs of rotation between sectors," commented John Augustine, chief investment officer of Huntington National Bank. He noted that the growth in the utilities sector (.SPLRCU) became a kind of indicator of a shift in investor interests.
Donald Trump's announcement of plans to appoint Robert F. Kennedy Jr. as head of the Department of Health and Human Services has become another factor of pressure on the market. Kennedy is known for his criticism of vaccines and ultra-processed foods, which has hit shares of vaccine makers and companies in the food sector. Investors reacted negatively to this news, fearing stricter regulations in these industries.
The current market dynamics show that investors are adapting to new challenges. The focus is shifting from profit expectations to cautious actions related to the Fed's policy and personnel changes in the administration. So far, this looks more like a strategy revision than the beginning of a global decline, but the market remains in a zone of uncertainty.
Defense and government contractor stocks came under pressure. The main reason was the uncertainty caused by Donald Trump's decision to appoint the head of the new Department of Government Effectiveness. Investors are worried that such changes could affect the size and nature of government contracts.
Information technology (.SPLRCT) was the weakest link among the 11 key S&P 500 sectors, ending the day down 2.5%. Semiconductors were particularly hard hit. The Philadelphia Semiconductor Index (.SOX) lost 3.4%, while shares of Applied Materials (AMAT.O) plunged 9.2% after the company provided first-quarter revenue guidance that fell short of Wall Street analysts' expectations.
The pharmaceutical sector also came under pressure. Moderna (MRNA.O) lost 7.3% and Pfizer (PFE.N) fell 4.7%, dragging the healthcare index (.SPXHC) down 1.88%. It was the fifth straight day of decline for the sector, which hit its lowest since May.
Even the relatively stable consumer staples (.SPLRCS) sector was hit hard, closing down 0.8%. The biggest losers were:
Weakness in key sectors from technology to consumer staples shows that investors are nervous. Political decisions and economic uncertainty continue to weigh on markets, forcing participants to rethink strategies and find new footholds.
The CBOE Volatility Index (.VIX), often called Wall Street's "fear barometer," rose to 17.55 on Friday, its highest since the Nov. 5 election. But the gauge fell back to 16.14 by the end of the day, signaling some of the market jitters had subsided.
Stocks falling than advancing on the New York Stock Exchange were outnumbered by decliners by 1.89 to 1, with 117 new highs and 108 new lows recorded on the day. The Nasdaq was even more dramatic, with 3,115 stocks falling and only 1,241 advancing, for a 2.51-to-1 ratio in favor of decliners.
The S&P 500 posted 13 new yearly highs and 25 new lows, while the Nasdaq Composite posted 36 new peaks and 285 new lows. Total trading volume on U.S. exchanges was 15.47 billion shares, exceeding the 20-session average of 13.94 billion.
Tech giant Nvidia Corp. (NVDA.O) is back in the spotlight, with investors turning their attention to the company's results, which could set a new direction for the U.S. stock market. With the election-driven rally slowing, markets are looking to the tech sector for inspiration, especially in artificial intelligence.
Nvidia's stock has soared nearly 800% in the past two years, driven by its leading position in the AI business. That has made the chipmaker the world's largest market cap company. Investors are eagerly awaiting more data from Nvidia to see if its dominance will continue and if it can breathe new life into a tired market.
The world's largest AI company, Nvidia, holds key positions in market benchmarks like the S&P 500 (.SPX) and the Nasdaq 100 (.NDX). Investors are waiting with bated breath for its results on November 20, which promise to be a gauge of the market's appetite for tech and AI stocks. The data could provide a clear signal of investor sentiment towards stocks in general.
After Nvidia surprised the market with phenomenal results last year, its guidance has become more muted. In the most recent quarter, the company beat expectations by just 6%, according to LSEG data. For investors, that's a sign that the era of big surprises may be over, and growth rates are becoming more realistic.
Nvidia's results cap a mixed third-quarter earnings season for U.S. companies. S&P 500 earnings rose 8.8% year-over-year, according to LSEG IBES, but only 76% of companies beat estimates. That's below the average of 79% over the past four quarters.
The bulk of this earnings season has once again been carried by a small group of mega-caps, including Nvidia, Apple (AAPL.O) and Microsoft (MSFT.O). The Magnificent Seven are posting earnings growth of 30%, while the other 493 companies in the S&P 500 are posting a much more modest 4.3%, according to LSEG senior analyst Tajinder Dhillon.
Despite the power and influence of tech giants, Nvidia and other mega-cap stocks have retreated this week as investors continue to digest the election fallout, assessing its long-term impact on the market and the broader economy.
BoJ Governor Kazuo Ueda reiterated on Monday that the bank is prepared to raise interest rates if economic conditions and price dynamics are in line with expectations. However, he avoided giving specifics on whether the rate hike could be as early as December, leaving markets in limbo.
Ueda, speaking at a press conference, noted the risks of keeping real rates low for too long, adjusted for inflation. Such a policy, he said, could drive inflation to excessive levels, forcing the bank to act more aggressively in the future.
Investors are focusing on Ueda's comments, looking for hints of a possible rate hike that could support the weak Japanese yen. The currency has weakened significantly, losing about 7% against the dollar since October. Last week, the rate exceeded 156 yen per dollar for the first time since July, raising concerns about the need for intervention by the Japanese authorities.
At the time of publication, the yen has recovered slightly and is trading at 154.40 per dollar. However, traders remain cautious, waiting for possible steps from the regulator.
According to IG analyst Tony Sycamore, the BOJ's decision on rates will depend on the exchange rate. "If the dollar-yen pair reaches the 160 level, it may increase the likelihood of a rate change. However, a rate around 150-152 will probably not prompt immediate action from the BOJ," the expert said.
He also added that a change in policy is inevitable: "It is a matter of time... The Japanese economy is in a stable state."
Markets expect the BOJ to continue its policy of balancing the economy and fighting inflation. Any decision by the regulator will not only be a signal for the currency markets, but also an important step in determining the long-term course of Japanese monetary policy.
Despite the weakening yen, Japan's Nikkei index (.N225) fell by 1.16%. The main reason was the losses in the technology sector, which remains sensitive to global economic challenges and exchange rate dynamics.
The MSCI index tracking shares of the Asia-Pacific region outside Japan (.MIAPJ0000PUS) showed a slight increase of 0.1%. At the same time, in China, the blue-chip CSI300 index (.CSI300) lost its early optimism and fell by 0.3%, and the Shanghai Composite (.SSEC) was practically unchanged, losing 0.03%.
Hong Kong's Hang Seng (.HSI) showed more confident results, ending the day with an increase of 0.65%.
European index futures were positive, with the EUROSTOXX 50 up 0.12% and the FTSE up 0.14%. This signals cautious optimism in European markets amid a changing global macroeconomic picture.
U.S. Treasury yields remain at multi-month highs. The 10-year yield has stabilized at 4.4296%, while the two-year yield has settled at 4.2971%. These figures reflect investors' revised expectations for the pace of Federal Reserve easing.
Futures put the odds of a 0.25% Fed rate cut in December at 60%. Meanwhile, the overall rate cut forecast by the end of 2025 has been reduced to 77 basis points, well below the 100 basis points expected just a few weeks ago.
Rising bond yields and a correction in rate expectations have strengthened the dollar. The currency has reached a fresh one-year high against a basket of other currencies, remaining at 106.63. The dollar's strength is putting pressure on emerging market currencies, but maintaining the safe-haven appeal of US Treasuries.
The pound sterling continues to trade near a six-month low, reaching $1.2636, indicating continued pressure on the British currency caused by economic uncertainty.
The euro, by contrast, showed a slight increase, rising 0.02% to $1.0544. Investors' attention is turning to upcoming speeches by European central bankers, who may clarify further monetary policy in the face of weak economic data and the threat of new tariffs from the US.
Oil prices are mixed. Brent crude futures rose slightly 0.1% to $71.11 a barrel. Meanwhile, US crude fell 0.04% to $66.99 a barrel. The mixed market moves suggest continued volatility and investor caution ahead of more demand and inventory data.
After a significant decline last week, spot gold prices rose steadily by 0.85% to $2,583.27 an ounce. Gold's recovery signals a return of investor interest in the safe haven asset amid ongoing global risks.
Upcoming comments from European central bankers and further oil price action could be key factors in determining the direction of markets in the coming days. Gold's rise confirms the high level of uncertainty that is causing market participants to stay away from risky assets.
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*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.
