Reuters US Business
By Chuck Mikolajczak
NEW YORK, Dec 1 (Reuters) - U.S. stocks closed modestly lower on Monday, weighed down by a jump in Treasury yields and economic data that showed tariffs remained a drag on the manufacturing sector, as investors looked toward the Federal Reserve's policy announcement next week.
The Institute for Supply Management's survey showed U.S. manufacturing contracted for a ninth straight month in November, as factories dealt with slumping orders and higher prices as the effect from tariffs lingered.
Markets have largely priced in a rate cut from the Fed at the conclusion of its two-day policy meeting on December 10. They are pricing in an 85.4% chance of a 25 basis-point cut, according to CME's FedWatch Tool.
"The market actually is still obviously earnings-driven, we went through earnings season, but now it's the Fed," said Joe Saluzzi, partner, co-founder and head of Equity Market Structure Research and co-head of Equity Trading at Themis Trading in Chatham, New Jersey.
"I see no reason why the uptrend doesn't continue, at least, not as quickly, but maybe more of a grind up to the end of the year."
The Dow Jones Industrial Average fell 427.09 points, or 0.90%, to 47,289.33, the S&P 500 lost 36.46 points, or 0.53%, to 6,812.63 and the Nasdaq Composite lost 89.76 points, or 0.38%, to 23,275.92. While many policymakers have struck a cautious tone, dovish signals from a few key voting members in recent weeks, along with reports that White House economic adviser Kevin Hassett is a leading contender to succeed Fed Chair Jerome Powell, have heightened expectations for further monetary easing in the months ahead.
Powell was scheduled to speak after the market close but was unlikely to address monetary policy due to the proximity to the central bank's policy meeting.
"I guess they'll look for hints of anything that he could say, but it looks like it's a done deal," said Saluzzi.
Investors are also waiting for a delayed September report on the Personal Consumption Expenditures Price Index, the Fed's preferred inflation gauge, due on Friday.
Despite expectations for a cut, U.S. Treasury yields were higher on Monday following weakness in Japanese and European government bonds in the wake of comments from Bank of Japan Governor Kazuo Ueda, who signaled that conditions were aligning for a possible rate hike. Bond yields move inversely to prices.
The rise in yields weighed on S&P 500 sectors such as real estate and utilities, which are seen by many investors as bond proxies.
Coinbase, which ended down 4.8%, and U.S.-listed shares of Bitfarms, off 5.7%, were among the crypto stocks that showed significant weakness, as bitcoin stumbled nearly 6% and at one point dropped below $85,000. The crypto market has lost more than $1 trillion in value since hitting a record of around $4.3 trillion, according to CoinGecko.
Strategy, the world's largest holder of the cryptocurrency, ended 3.3% lower after tumbling as much as 12%. It cut its earnings forecast for 2025, citing a weak run in bitcoin.
Big-box retailers were in focus on Cyber Monday, with shoppers expected to spend $14.2 billion online, according to Adobe Analytics. Shares of Walmart and Target advanced 0.9% and 0.8%, respectively. The S&P 500 retail index edged up 0.2%.
Synopsys shares closed 4.9% higher after AI chip leader Nvidia said it had invested $2 billion in the semiconductor design software provider.
Declining issues outnumbered advancers by a 1.86-to-1 ratio on the NYSE and by a 2.33-to-1 ratio on the Nasdaq.
The S&P 500 posted 17 new 52-week highs and one new low, while the Nasdaq Composite recorded 76 new highs and 78 new lows.
Volume on U.S. exchanges was 15.64 billion shares, compared with the 18.64 billion average for the full session over the last 20 trading days.
(Reporting by Chuck Mikolajczak in New York; Additional reporting by Johann M Cherian and Pranav Kashyap in Bengaluru; Editing by Shinjini Ganguli and Matthew Lewis)
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