Fed Rate Cut Speculations Rattle Stocks, Commodities Slide, Bitcoin Shines: What's Driving Markets Monday?

Stocks opened the first week of December with significant losses, driven by some emerging concerns of exaggerated rate cut speculations within the trading community.

Traders have recently scaled back their expectations for a rate cut in March 2024, as indicated by CME Group’s FedWatch Tool, which now suggests a 56% probability compared to the nearly 65% probability observed on Friday. Additionally, although fed futures reveal that a total of five rate cuts by December 2024 are still more likely than not, investors’ convictions on this outcome have softened somewhat.

Short-term Treasury yields experienced a notable increase, with yields on the 2-year note, which is particularly sensitive to policy changes, surging by 12 basis points to reach 4.67%. As yields rose, long-dated Treasury bonds fell, with the iShares 20+ Year Treasury Bond ETF TLT down 0.8%.

These rate adjustments have had a ripple effect on the stock market, with the S&P 500 down by 0.7%, the Nasdaq falling by 1.2%, and the Dow Jones losing nearly 100 points. Interestingly, small-cap stocks were the sole bright spot on Wall Street.

Commodities experienced a significant sell-off driven by a strengthening dollar and rising Treasury yields. Gold, which had reached all-time highs at $2,140 per ounce overnight, saw a sharp decline of 2.3%, while silver tumbled by over 3%.

Additionally, oil prices weakened, with WTI-grade crude trading 1.3% lower at $73 per barrel. Meanwhile, Bitcoin BTC/USD is on a remarkable 4% daily run, amid rising speculation over a Bitcoin ETF approval.

Monday’s Performance Of US Stock Indices

• The SPDR S&P 500 ETF Trust SPY fell 0.6% to $456.13.
• The SPDR Dow Jones Industrial Average ETF DIA eased 0.2% to $362.38. 
• The Invesco QQQ Trust QQQ tumbled 1.2% to $385.23.
• The iShares Russell 2000 ETF IWM surprisingly rose 0.7% to $186.16, according to Benzinga Pro data.

Chart Of The Day: Bitcoin Shows A 65% Gap To All-Time Highs

Sector, Industry ETFs Performance

Sector-wise, defensive industries like healthcare and consumer staples avoided losses on Monday, and surprisingly, the real estate sector also showed strength.

Conversely, the Communication Services Select Sector SPDR Fund XLC and the Technology Select Sector SPDR Fund XLK, experienced significant declines, down by 1.3% and 1.5%, respectively.

Looking at specific industries, airlines notably stood out, with the U.S. Global Jets ETF JETS surging by 3.8%. On the other hand, gold miners, represented by the VanEck Gold Miners ETF GDX, struggled, down 3.4%.

Stocks In Focus

• Coinbase Inc. COIN is up over 6%, reacting to the Bitcoin’s rally.
• Science Applications International Corp. SAIC rose nearly 10% after the company lifted its earnings outlook.
• Uber Technologies Inc. UBER is up 4% after being included to the S&P 500 Index.
• Gamestop Corp. GME is up over 9% as investors anticipate earnings due on Wednesday.
• Spotify Technology SPOT is up over 7%, as the company announced to lay off about 17% of its workforce.
• Alaska Air Group Inc. ALK tumbled over 14%, after the company announced it would acquire Hawaiian Airlines parent company Hawaiian Holdings HA for $1.9 billion. Shares of Hawaiian Holdings are up 187%.
• Palantir Technologies Inc. PLTR stood out as the weaker tech companies within the Russell 1000, down 9.5% on a broader sector sell-off.

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