Hopes for a December rate cut were solidified after last week’s data that showed consumer spending increased moderately toward the end of the third quarter. However, investors are still waiting for clues about future policy moves from what is expected to be the most divided Fed in years.
“It’ll be hard for the market to find a direction that it wants to follow until after the Fed meeting,” said Carol Schleif, chief market strategist at BMO Private Wealth. “We just came off a really strong earnings season and we won’t have earnings again for another four weeks. The only thing that the market really has to hang its hat on or to point to is the Fed.”
Traders are now pricing in a roughly 89% chance of a 25-basis-point rate cut on Wednesday according to the CME’s FedWatch Tool.
Meanwhile, higher yields on US Treasury bonds also put some pressure on equities. The US 10-year Treasury yield rose soon after a powerful earthquake struck off the coast of Japan.
According to preliminary data, the S&P 500 lost 22.56 points, or 0.33%, to end at 6,847.84 points, while the Nasdaq Composite lost 29.33 points, or 0.12%, to 23,549.62. The Dow Jones Industrial Average fell 208.31 points, or 0.45%, to 47,740.99.
In individual stocks, Paramount Skydance’s hostile US$108.4 billion bid to buy Warner Bros Discovery garnered investor attention as it aimed to outbid Netflix. The bid sent shares of Warner Bros Discovery higher while Paramount’s shares rallied sharply and Netflix sank.
Netflix was a drag on the S&P 500 Communication Services Index, which lagged during the session.
Technology was the strongest sector, with boosts from Microsoft, Nvidia and Broadcom.
Later this week, the focus will shift to tech sector valuations, with earnings reports due from Broadcom and Oracle, as investors have been worried about debt-funded artificial intelligence spending.
Elsewhere, chipmaker Marvell Technology shares sold off after used-car dealer Carvana beat it to securing a spot in the S&P 500. Carvana shares rallied after the decision.
Confluent shares soared after IBM said it will acquire the data-infrastructure company for about US$11 billion.
Tesla ended lower following Morgan Stanley’s bearish view on the electric-vehicle maker.
Also on Monday, Oppenheimer forecast a Street-high year-end 2026 target of 8,100 points for the S&P 500, citing strong earnings and macro resilience.