1 week ago
Benchmark indices on Wall Street took a breather on Tuesday after the post-Donald Trump election win rally witnessed profit booking at higher levels.
The Dow Jones fell nearly 400 points, while the S&P 500 declined by 0.3% after its best five-day rally of the year. THe Nasdaq Composite closed just below the flat line. Both S&P 500 and the Nasdaq snapped five-day winning streaks.
Key components of the so-called Trump Trades were the biggest losers on Tuesday. Tesla fell 6% after a 44% rally in five sessions, as did the Russell 2000, the Smallcap index, that declined nearly 2%. Mid and Smallcap stocks are projected to do well under a Trump presidency.
Treasury 10-year yields advanced 12 basis points to 4.43%. The Bloomberg Dollar Spot Index rose 0.4%. The US Dollar rose to the highest level since November 2022. The two-year yield also rose to the highest since July at 4.33%.
The post-election advance in US stocks could stall as investors start to take profits, according to strategists at Citigroup Inc. led by Chris Montagu. Investor exposure to American shares jumped to the highest since 2013 after the presidential vote amid optimism around stronger economic growth, according to a survey from Bank of America Corp.
“We are on watch for potential profit taking, consolidation, or even correction for US equities heading into the first quarter of the new year,” said Dan Wantrobski at Janney Montgomery Scott. “Upward momentum remains strong and investor sentiment favorable, but stocks are once again overbought/extended across multiple timeframes.”
All eyes are now on the core consumer price index due on Wednesday, which excludes food and energy, which likely rose at the same pace on both a monthly and annual basis compared to September’s readings. The overall CPI probably increased 0.2% for a fourth month, while the year-over-year measure is projected to have accelerated for the first time since March.
A survey conducted by 22V Research shows 55% of investors expect the market reaction to CPI to be “mixed/negligible”, 31% said “risk-off” and only 14%, “risk-on.”
Scott Kleinman at Apollo Global Management Inc. has warned markets not to get too comfortable with the current trajectory of inflation and interest rates.
“Inflation is not tamed,” Kleinman said in a Bloomberg Television interview on Tuesday. “The Fed can say what it wants. You just have to open your eyes and look around.”
Swap contracts are pricing in about 14 basis points of easing, or about 55% of a quarter-point rate cut on December 18, down from near full certainty at the start of the month.
(With Inputs From Agencies.)
