Monday proved to be a step back for the main U.S. stock indices and bond markets as they consolidated last week’s surge on hopes the Federal Reserve is finally done tightening and ready to ease in 2024.
But while some suspect the rates market ebullience may have jumped the gun – and two Fed cuts by June are still more than fully priced – the emphasis merely shifted to small caps that have underperformed all year due to a disproportionate hit from higher borrowing costs.
As the S&P500 fell back about 0.5% from Friday’s 2023 closing peak, the Russell 2000 raced 1% higher to its highest in three months – and is now clocking annual gains of close to 7%.
While that’s still less than half the main benchmark, a late-year rotation in search of value seems to be on – with the year’s megacap tech winners scaling back a bit.
The New York FANG+TM index of tech and digital giants has now fallen back for four sessions in a row, shaving about 3% off its peaks since the start of the month but still sustaining eye-popping 82% year-to-date gains.
The likes of Microsoft, Apple, Nvidia and Amazon fell back over 1%, pressured by a modest bounceback in U.S. Treasury yields.
And despite some concerns in Treasuries about a heavy investment grade corporate bond sale diary this week, yields fell back again ahead of Tuesday’s bell as attention turned to this week’s series of critical U.S. jobs market updates.
October job openings are reported later in the day, before a private sector hiring update for November tomorrow, weekly jobless on Thursday and the national payrolls report Friday.
Oil prices hovered just above 5-month lows, with global demand concerns outweighing some output cuts.
