All three major U.S. equity indexes finished lower, continuing a trend of declining prices driven by a sell-off in bitcoin and its associated stocks, compounded by disappointing economic indicators. However, historical trends suggest a potential rebound for the S&P 500, with investors eagerly anticipating a possible reduction in interest rates by the Federal Reserve.
The S&P 500 managed to recover from a nearly 5% dip earlier in the month and ultimately closed November with a slight gain of 0.1%. Adam Turnquist, Chief Technical Strategist at LPL Financial, attributed this modest increase to technical oversold conditions, robust earnings, renewed optimism surrounding artificial intelligence (AI), and adjustments in expectations regarding forthcoming rate cuts. Turnquist highlighted that historically, December has been a favorable month for the S&P 500, averaging a gain of 1.4% since 1950 and closing higher 73% of the time, with the strongest performance often seen in the latter half of the month.
In economic news, the Institute for Supply Management (ISM) reported a decline in the Manufacturing Purchasing Managers Index (PMI), which dropped to 48.2% in November from 48.7% in October. A PMI above 42.3% is typically indicative of economic expansion. Barclays economist Jonathan Millar remarked that while the ISM’s latest figures were slightly softer than expected, they should not be seen as particularly alarming. He noted that the ISM index was more pessimistic compared to the S&P Global Manufacturing PMI, which fell to 52.2% from 52.5% in the same period.
Market analysts are looking toward the delayed release of September’s Personal Consumption Expenditures Price Index (PCE) data, which the Fed prioritizes for gauging price stability. Current projections reflect an 87.6% likelihood that the Federal Open Market Committee will sanction a 25 basis-point rate cut during its upcoming meeting.
As the trading day drew to a close, the S&P 500 edged down by 0.5% to 6,812, the Dow Jones Industrial Average decreased by 0.9% to 47,289, and the Nasdaq Composite fell 0.4% to 23,275.
The cryptocurrency market, notably bitcoin, faced significant challenges, impacting shares tied to digital assets. Coinbase Global saw a decline of 4.8%, reflecting the ongoing volatility in cryptocurrency prices. Analyst Gautam Chhugani observed that bitcoin had fluctuated between $82,000 and $92,000, ultimately closing at around $86,000, underscoring a weak market sentiment affecting digital asset equities. Notably, Coinbase’s stock has dropped over 20% in the past month, while Robinhood Markets also fell by 4.1%.
Despite the bearish sentiment, speculative activities seem concentrated in a few stocks, with Chhugani suggesting that operational businesses in the crypto domain remain strong. He pointed out that companies like MicroStrategy (MSTR) also faced challenges, but he considered the concerns over its viability overstated. MicroStrategy recently revealed a purchase of 130 bitcoin and launched a $1.44 billion U.S. dollar reserve fund for dividend payments and debt obligations while adjusting its future bitcoin price expectations.
In contrast, Nvidia (NVDA) reported a slight increase of 1.7%, now boasting a market capitalization that exceeds the combined value of the entire cryptocurrency market. The tech giant’s market growth followed its announcement of a $2 billion investment in Synopsys, focusing on enhancing AI capabilities in electronics. Along with Nvidia, prominent companies like Apple, Alphabet, and Microsoft have market valuations that surpass those of cryptocurrencies, which indicates a shifting landscape in tech investing versus the volatile crypto environment.
