Major stock indexes closed lower on Monday as investors waited nervously for the Federal Reserve monetary policy update due on Wednesday.
Hopes for a December rate cut were solidified after last week’s data that showed U.S. 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 U.S. Treasury bonds also put some pressure on equities.
The Dow Jones Industrial Average fell 215.67 points, or 0.45%, to 47,739.32, the S&P 500 lost 23.89 points, or 0.35%, to 6,846.51 and the Nasdaq Composite lost 32.22 points, or 0.14%, to 23,545.90.
Toronto’s S&P/TSX Composite Index closed down 141.44 points, or 0.45%, at 31,169.97. The benchmark index posted a fresh record high on Thursday but ended the week lower. The TSX is up over 25% for the year and looks to post its best year since 2009.
Markets have cemented expectations that the Bank of Canada will hold rates at its December meeting this week following stronger-than-expected jobs data, with the central bank having eased the borrowing rate by one percentage point since the start of the year.
The TSX materials group, which includes metal mining shares, fell 1.5%, tracking metal prices. The communication services index declined 1.2% with Rogers and BCE dropping 1.4% and 0.6% respectively.
On the flipside, technology stocks gained 0.7%. Heavyweight data-center infrastructure provider Celestica added 5.1%, while cybersecurity company BlackBerry rose 2.3%.
Transcontinental shares jumped 19% after agreeing to sell its packaging unit to ProAmpac Holdings, valuing it at C$2.22 billion, including debt.
In individual U.S. 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 up 4.4%, while Paramount’s shares jumped 9% and Netflix stock dropped 3.4%.
Netflix was among the major drags on the S&P 500 Communication Services Index, which closed down 1.8% and was the biggest laggard of the benchmark’s 11 major industry sectors.
The sole advancing sector was technology in the U.S., which added 0.9% 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. In a move that BMO’s Schleif said was positive for AI-related companies, U.S. President Donald Trump said he would sign an executive order this week to create a single national rule for artificial intelligence. Technology companies have been looking to override disparate laws passed by U.S. states.
However, Google parent Alphabet still ended down more than 2%, marking the biggest drag on the communications services index, followed by Meta Platforms. Elsewhere, chipmaker Marvell Technology shares dropped 7% after used-car dealer Carvana beat it to securing a spot in the S&P 500. Carvana shares finished up 12% after the decision. Confluent shares soared 29% after IBM said it will acquire the data-infrastructure company for about $11 billion. IBM shares ended up a modest 0.4%.
Tesla ended down 3% 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.
Declining issues outnumbered advancers by a 2.04-to-1 ratio on the NYSE, where there were 167 new highs and 68 new lows. On the Nasdaq, 2,092 stocks rose and 2,672 fell as declining issues outnumbered advancers by a 1.28-to-1 ratio. The S&P 500 posted 20 new 52-week highs and 10 new lows, while the Nasdaq Composite recorded 149 new highs and 79 new lows.
On U.S. exchanges, 16.12 billion shares changed hands, compared with the 17.52 billion average for the last 20 sessions.
Reuters, Globe staff