(Bloomberg) -- A selloff in the world’s largest technology companies weighed on stocks, while the latest economic data bolstered bets on a cautious pace of Federal Reserve rate cuts.
Equities halted a seven-day rally that drove the S&P 500 to all-time highs. Nvidia Corp. dropped 3%, leading losses in megacaps. Dell Technologies Inc. and HP Inc. tumbled after their results disappointed investors who have been waiting for a recovery in the personal computer market. Treasury yields dropped across the US curve, but traded off session lows.
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While in-line with estimates, the core personal consumption expenditures price index climbed 2.8% from October last year. Separate figures showed the economy expanded at a solid pace. The data support recent comments by many Fed officials that there’s no rush to cut rates so long as the labor market remains healthy and the US continues to power ahead.
To Bret Kenwell at eToro, while PCE matched expectations, there may be some concerns that the final push to get inflation to the Fed’s 2% target will take some time. Overall inflation has been moving in the desired direction, but a lack of further follow-through could force investors to reassess bets on future rate cuts, he noted.
“The last mile towards price stability has been stymied by still ‘sticky’ inflation and bumps along road,” said Quincy Krosby at LPL Financial.
The S&P 500 dropped 0.3%. The Nasdaq 100 slid 1.2%. The Dow Jones Industrial Average was little changed.
Treasury 10-year yields declined five basis points to 4.26%. The Bloomberg Dollar Spot Index fell 0.6%. Some traders said solid month-end flows are behind some of the weakness in the greenback ahead of the Thanksgiving holiday.
Oil held steady as traders waited for clues on whether OPEC+ will delay restoring output and speculated about the durability of a truce between Israel and Lebanon-based Hezbollah.
JPMorgan Chase & Co., which for two consecutive years maintained a bearish forecast for the S&P 500, is now predicting a gain for the US stock benchmark in the year ahead. The firm’s 2025 target for the gauge is 6,500, up from a forecast of 4,200 throughout the past two years, according to Dubravko Lakos-Bujas.
“The central equity theme for next year is one of higher dispersion across stocks, styles, sectors, countries, and themes,” he wrote. US exceptionalism could face turbulence amid policy uncertainty in the new year, “but opportunities are likely to outweigh risks.”
US stocks have extended their outperformance against international peers this year, powered by tech shares and the artificial intelligence frenzy, while the economy remains resilient and the Federal Reserve has embarked in an interest-rate cutting cycle amid falling inflation.
The S&P 500 has climbed 26% in 2024, making numerous record highs, while the MSCI World Ex-USA Index only returned about 3.5%. The valuation gap has also widened, with US stocks now trading at a record 60% premium to international peers based on forward price-to-earnings ratios.
Inflows into US equities surged after the election and a retail frenzy is back, while selling of Europe continues unabated, according to Barclays Plc’s Emmanuel Cau.
The strategist still sees some dry powder as despite big US inflows from long-only funds and retail, there was limited re-grossing by hedge funds and systematic strategies. He says sentiment indicators haven’t rebounded with the overall market, suggesting bullishness is not as widespread as it seems.
Corporate Highlights:
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CrowdStrike Holdings Inc. issued a weaker-than-expected earnings forecast, disappointing investors who have been watching for signs that it has recovered from a flawed update that crashed computers around the world.
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Urban Outfitters Inc. reported stronger-than-expected sales growth in the third quarter, led by its Anthropologie brand.
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Nordstrom Inc. raised the lower end of its annual sales guidance after its off-price and flagship chains reported quarterly growth that was better than expected — results that could encourage the company’s board to push the founding family for a better offer to take Nordstrom private.
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BlackRock Inc., Vanguard Group Inc. and State Street Corp. were sued by a group of states led by Texas for allegedly breaking antitrust law by boosting electricity prices through their investments, in the highest-profile lawsuit yet against the beleaguered ESG industry.
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Symbotic Inc. cut its first-quarter revenue forecast and said it was unable to file its annual filing due to accounting errors.
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Brookfield Asset Management Ltd. walked away from a plan to acquire Grifols SA, ending months of negotiations to take over the Spanish blood-plasma company.
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BYD Co. has asked suppliers to accept price cuts next year in a signal the Chinese electric vehicle maker is preparing for the brutal price war in the world’s biggest auto market to intensify.
Key events this week:
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Eurozone consumer confidence, Thursday
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US Thanksgiving holiday. Markets closed, Thursday
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Eurozone CPI, Friday
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ECB releases consumer expectations survey for October, Friday
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“Black Friday,” the traditional start of the US holiday shopping rush
Some of the main moves in markets:
Stocks
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The S&P 500 fell 0.3% as of 10:53 a.m. New York time
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The Nasdaq 100 fell 1.2%
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The Dow Jones Industrial Average was little changed
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The Stoxx Europe 600 fell 0.3%
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The MSCI World Index fell 0.1%
Currencies
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The Bloomberg Dollar Spot Index fell 0.6%
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The euro rose 0.8% to $1.0575
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The British pound rose 0.9% to $1.2679
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The Japanese yen rose 1.3% to 151.13 per dollar
Cryptocurrencies
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Bitcoin rose 4.6% to $95,867.84
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Ether rose 7.5% to $3,570.38
Bonds
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The yield on 10-year Treasuries declined five basis points to 4.26%
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Germany’s 10-year yield declined one basis point to 2.17%
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Britain’s 10-year yield declined four basis points to 4.31%
Commodities
This story was produced with the assistance of Bloomberg Automation.
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