New York Stocks Turn Lower... Tech Shares Surrender Gains as Hopes for December Rate Cut Fade

"Nvidia Gives Up Morning Gains After 'Surprise Earnings,' Falls 2.7%"
"Market Reinterprets September Jobs Data That Exceeded Expectations"
"Prospects for Additional Rate Cuts This Year Weaken"

On November 20 (local time), the three major U.S. stock indexes started higher on the back of Nvidia's surprise earnings but later turned lower. As the September employment data came in better than expected, expectations for a rate cut in December diminished. Consequently, investors moved to realize profits, leading technology stocks, including Nvidia, to give up most of their earlier gains.

On the 20th (local time), a trader is working on the trading floor of the New York Stock Exchange (NYSE) in the United States. Photo by AFP

As of 2:13 p.m. on the same day on the New York Stock Exchange, the blue-chip Dow Jones Industrial Average was down 282.5 points (0.61%) at 45,856.27. The S&P 500 Index, which focuses on large-cap stocks, had fallen 76.13 points (1.15%) to 6,566.03, while the tech-heavy Nasdaq Index was trading at 22,191.341, down 372.889 points (1.65%).

By stock, Nvidia was down 2.68%. AMD and Broadcom were declining by 5.91% and 1.1%, respectively. U.S. retail giant Walmart, after posting better-than-expected earnings and raising its annual outlook, was up 6.29%.

Investors showed strength in the early session as they digested Nvidia's strong earnings announced the previous day and the September employment report released before the market opened. Nvidia reported record revenue of $57.01 billion for the third quarter of its fiscal year (August to October), up 62% year-on-year. The company also provided a fourth-quarter revenue outlook of $65 billion, higher than market expectations, partially easing concerns about an artificial intelligence (AI) bubble.

However, as the market continued to reinterpret the employment data, sentiment turned bearish again. According to the Bureau of Labor Statistics (BLS) under the Department of Labor, nonfarm payrolls increased by 119,000 in September, significantly exceeding the market expectation of 53,000. However, the unemployment rate edged up from 4.3% in August to 4.4% in September, which was largely attributed to the labor force participation rate rising to 62.4%.

This data confirmed that the slowdown in the labor market is not proceeding as rapidly as expected, leading to speculation that the likelihood of a rate cut by the Federal Reserve next month has decreased. According to CME FedWatch, the market had raised the probability of the Fed cutting its benchmark rate (currently 3.75-4.0%) by 0.25 percentage points in December from 30% the previous day to around 45% in the morning, but it has since fallen back to the high 30% range. With mixed signals from rising nonfarm payrolls and a higher unemployment rate, the market's outlook on interest rates continues to fluctuate.

Jeff Kilburg, founder and CEO of KKM Financial, commented, "As the likelihood of a December rate cut diminishes, interest in Nvidia is fading," adding, "The market was expecting a cut in December, but the mood seems to have changed."