The biggest U.S. stocks pullback in months is fraying investors\u2019 nerves ahead of tests to two underpinnings of the market\u2019s record-breaking rally: the artificial intelligence trade and expectations for interest rate cuts. <\/p>\n
After a sharp and steady six-month climb, stocks have been sliding in November. The S&P 500 was last down on Tuesday over 3% from its late October all-time high, while the Nasdaq Composite had dropped about 6% from its peak from that time. The S&P 500 on Monday closed below its 50-day moving average, a key intermediate trend indicator, for the first time since April 30. The Cboe Volatility Index, Wall Street\u2019s fear gauge, rose on Tuesday to its highest level in a month. <\/p>\n
Several investors said the declines could be healthy for the bull market, to shake out speculative froth, with the benchmark S&P 500 still up over 30% since its low for the year in April. However, elevated valuations are keeping investors alert for signs of an \u201cAI bubble,\u201d with high-flying technology stocks bearing the brunt of the latest weakness.<\/p>\n
\u201cMarkets are needy of getting both reassurance the Fed is going to cut rates and also reassurance that the AI trade is not going to go south,\u201d said Tony Roth, chief investment officer at Wilmington Trust. <\/p>\n
Investors have zeroed in for weeks on the quarterly report from Nvidia Corp, the world\u2019s largest company by market value, as a potentially pivotal moment for the AI trade. The semiconductor company, whose chips are central to the massive AI infrastructure buildout rippling through corporations, reports fiscal third-quarter results after the market closes on Wednesday.<\/p>\n
\u201cI can\u2019t think of a real reason to go in and buy aggressively until that\u2019s out of the way,\u201d said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.<\/p>\n
With the U.S. government shutdown ending last week, investors are expecting a deluge of delayed official data to be released, starting with September\u2019s employment report on Thursday, and its importance for monetary policy. The Federal Reserve had been expected to cut interest rates for the third straight meeting on December 10 in response to a labor market that showed signs of weakening ahead of the shutdown. But Chair Jerome Powell and other Fed officials have pushed back against expectations that a quarter-point cut was a done deal, and Fed funds futures as of Tuesday were indicating a roughly 50-50 chance of such a move next month.<\/p>\n
\u201cThe nonfarm payrolls report will hold a whole lot of weight with policymakers, whether or not they need to move forward with additional easing,\u201d said Matt Stucky, chief portfolio manager, equities, at Northwestern Mutual Wealth Management. \u201cSo it definitely is a market moving event.\u201d<\/p>\n
Lacking fresh government data during the 43-day shutdown, the longest in U.S. history, investors had little of the evidence they rely on to gauge the economy\u2019s health.<\/p>\n
\u201cI think a lot of people are worried that the data is going to be indicating a more protracted slowdown,\u201d said Robert Pavlik, senior portfolio manager at Dakota Wealth.<\/p>\n
While a weak jobs number could shore up expectations of a December rate cut, \u201cdepending on how weak the numbers are, I guess you have to be careful what you wish for,\u201d Pavlik said.<\/p>\n
Along with the pullback in stocks, gold and bitcoin, which also had put up strong performances since April, have fallen in recent weeks.<\/p>\n
Such \u201cfroth\u201d coming out of several assets \u201cis a sign of how sentiment had just gotten very complacent, not just around AI, but around anything that was going up,\u201d said Marta Norton, chief investment strategist at retirement and wealth services provider Empower.<\/p>\n
\u201cI don\u2019t think it\u2019s a bubble because there\u2019s still enough fundamental health in the market,\u201d Norton said, describing it more as a \u201ccourse correction.\u201d The selloff is \u201cvery limited,\u201d said Johanna Kyrklund, group chief investment officer at Schroders. \u201cIt\u2019s just that we\u2019ve got used to such a low level of volatility that is abnormal.\u201d<\/p>\n
For example, the S&P 500\u2019s latest pullback has yet to remotely approach 10%, the level widely defined as a market correction.<\/p>\n
Schroders remained optimistic about U.S. equities, Kyrklund said, describing the economic environment as benign during a briefing with reporters. <\/p>\n
\u201cValuations are expensive, but they can probably stay expensive for a bit longer.\u201d Jim Carroll, a senior wealth advisor and portfolio manager at Ballast Rock Private Wealth who analyzes volatility and other trading signals, wrote in a commentary that cracks have formed in what is a longer-term uptrend.<\/p>\n
\u201cIt\u2019s a really good time to gut check your exposure and get comfortable with the potential for a pullback more meaningful than one day or a week,\u201d Carroll said. <\/p>\n","protected":false},"excerpt":{"rendered":"The biggest U.S. stocks pullback in months is fraying investors\u2019 nerves ahead of tests to two underpinnings of…\n","protected":false},"author":2,"featured_media":292192,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[62,901,276,277,888,902,879,877,903,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":["post-292191","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-alberta","tag-artificial-intelligence","tag-artificialintelligence","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-ca","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/292191","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=292191"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/292191\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/292192"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=292191"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=292191"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=292191"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}