S&P futures experienced a modest increase on Tuesday, as market participants sought to rebound from a lacklustre beginning to December trading. Futures associated with the Dow Jones Industrial Average increased by 63 points, or 0.1%. S&P 500 and Nasdaq-100 futures increased by 0.2% and 0.4%, respectively. The principal U.S. indexes commenced the week on a negative note, concluding their five-day winning streaks on Monday. Recent weeks have seen a risk-off sentiment that has exerted pressure on the bull market, driven by concerns over persistent inflation, high valuations, and the returns associated with artificial intelligence investments, which are weighing heavily on investor sentiment.
The decline in cryptocurrencies deepened in the last session, with bitcoin experiencing a 6% drop, marking its most significant loss since March. Cryptocurrency equities Coinbase and Robinhood each experienced a decline exceeding 4%. November’s notable “Magnificent Seven” stock, Google parent Alphabet took back some gains and fell 1.7%, while other tech heavyweights Palantir and Broadcom also declined. Gold prices increased alongside a rise in bond yields. Despite November being a lacklustre month for technology equities, the S&P 500 and the 30-stock Dow managed to register modest gains. Investors are now on the lookout for potential catalysts that might trigger a rally as the year draws to a close.
Market participants are exhibiting a positive sentiment regarding the likelihood of the Federal Reserve announcing a reduction in interest rates on December 10, following the conclusion of its upcoming policy meeting. Markets are currently assigning an 87.6% probability to a rate cut in the forthcoming meeting, a significant increase compared to the probabilities observed in mid-November, as per source. “Bulls continue to benefit from robust technical and fundamental factors as we near the end of the year.” On the technical front, December continues to be a robust seasonal month; fund flows have shown consistency, risk metrics have seen improvement, and the S&P 500 has rallied above the 50-day moving average. Additionally, breadth has strengthened, although sentiment persists at historically low levels,” stated Mark Hackett.
“The bear’s argument hinges on apprehensions regarding the sustainability of the AI expansion and the high valuations.” Historically, December has demonstrated robust performance for the broader market. The S&P 500 typically experiences an increase exceeding 1% in December, positioning it as the third most favourable month of the year for this benchmark, based on historical data dating back to 1950, as per reports.