US Market Indices Decline as Traders Await Critical Payroll Data

US equity markets settled lower on Monday, with the S&P 500 dropping -0.16%, the Dow Jones Industrials retreating -0.09%, and the Nasdaq 100 sliding -0.51%. December futures contracts followed suit, as the E-mini S&P 500 declined -0.14% and E-mini Nasdaq futures fell -0.51%. Stock prices that initially climbed early in the session ultimately reversed course, with major benchmarks testing 2-week and 2.5-week lows respectively. Traders positioned defensively ahead of Tuesday’s highly anticipated November employment report, marking a significant event on the economic calendar.

Market Headwinds: Tech Sector and Commodities Under Pressure

The technology sector experienced particular weakness, with artificial intelligence infrastructure names leading declines. Broadcom tumbled over -5%, while Oracle dropped more than -2%, as disappointing guidance from both companies last week has triggered a reassessment among investors regarding the substantial capital commitments directed toward AI infrastructure development. This rotation reflects growing skepticism about valuations amid uncertainty surrounding the ultimate returns on these investments.

Energy-related equities also retreated substantially. WTI crude oil prices slipped to a 1.75-month low, weighing on producers like Devon Energy (down -3%), APA Corp (down -2%), and Occidental Petroleum (down -2%). Meanwhile, cryptocurrency-exposed equity securities experienced significant declines as Bitcoin ($89.40K, +1.41% on recent data) fell more than -4% to a 2-week low. This triggered selloffs in Riot Platforms (down -7%), Galaxy Digital Holdings (down -6%), Microstrategy (down -5%), Marathon Holdings (down -5%), and Coinbase Global (down -3%).

Mixed Economic Signals and Fed Policy Stance

Monday’s domestic economic data presented conflicting indicators for market participants. The December Empire manufacturing index contracted unexpectedly to -3.9, significantly below the anticipated 10.0 reading. Conversely, the December NAHB housing market index rose to an 8-month high of 39, aligning with expectations.

Federal Reserve officials delivered relatively dovish commentary on Monday. Fed Governor Stephen Miran characterized the Fed’s current policy position as unnecessarily restrictive given benign inflation dynamics and emerging labor market weakness. New York Fed President John Williams echoed this sentiment, noting that the FOMC has shifted monetary policy toward a neutral stance amid elevated employment risks and moderating inflation pressures. These comments provided some support for equity valuations despite the day’s weakness.

International Developments and China Concerns

Weaker-than-expected economic data from China raised concerns about global growth momentum. China’s November industrial production growth decelerated to +4.8% year-over-year from +4.9% in October, trailing the +5.0% forecast. Retail sales expansion similarly disappointed at +1.3% year-over-year, significantly below the +2.9% expectation and marking the weakest pace in 2.75 years. Additionally, new home prices declined 0.39% month-over-month, extending a streak of 30 consecutive monthly decreases. These developments suggested broader economic softness heading into year-end.

Overseas equity markets closed with a mixed tone. Europe’s Euro Stoxx 50 gained +0.56%, while China’s Shanghai Composite declined -0.55%, and Japan’s Nikkei Stock 225 fell -1.31%.

US Macroeconomic Calendar: Critical Week Ahead

Investors should focus on several key reports this week that could influence market direction. November nonfarm payrolls are projected to increase by +50,000, with the unemployment rate expected to hold at 4.5%. Average hourly earnings are anticipated to rise +0.3% month-over-month and +3.6% year-over-year. October retail sales are expected to show +0.1% month-over-month growth, with retail sales excluding automobiles anticipated to rise +0.2% month-over-month. The December S&P manufacturing PMI is projected to decline marginally to 52.0.

Later in the week, weekly initial jobless claims are forecast to drop -11,000 to 225,000. November consumer price inflation is expected at +3.1% year-over-year, with core CPI anticipated at +3.0% year-over-year. By week’s end, November existing home sales are projected to increase +1.2% month-over-month to 4.15 million units, while the University of Michigan consumer sentiment index for December is expected to be revised upward by +0.2 to 53.5.

Treasury Markets and Rate Expectations

March 10-year Treasury notes advanced +3.5 ticks to close the session, with yields declining -0.4 basis points to 4.180%. The strength in intermediate-term Treasuries reflected support from contractionary manufacturing data and dovish Fed commentary. However, gains were partially reversed following the stronger-than-expected housing index, which weighed on prices as traders adjusted expectations. The yield curve has continued steepening since the FOMC’s December announcement of $40 billion in monthly short-term Treasury purchases to enhance financial system liquidity.

European government bond yields moved lower on Monday. The 10-year German bund yield fell -0.4 basis points to 2.853%, while the 10-year UK gilt yield declined -2.1 basis points to 4.496%.

Current market pricing suggests only a 22% probability that the FOMC will implement a 25 basis point rate cut at the January 27-28 policy meeting.

Individual Stock Movements

Beyond broad market trends, several equities experienced notable moves. ServiceNow declined more than -10% after KeyBanc downgraded the stock to underweight with a $775 price target. ARM Holdings fell more than -5% following a Goldman Sachs downgrade to sell with a $120 target. Adobe retreated more than -2% on a KeyBanc downgrade.

On the upside, Immunome surged more than +13% following positive Phase 3 trial results for Varegacestat. ZIM Integrated Shipping Services climbed more than +8% after reports of a potential acquisition bid. Bristol-Myers Squibb advanced more than +3% on a BofA upgrade to buy, while Hershey Co. gained more than +3% after a Morgan Stanley upgrade to overweight.