[New York Stock Exchange] Indexes Fall on Caution Over November Jobs and Inflation Data... Nasdaq Down 0.59% on Tech Weakness

Nonfarm Payrolls Expected to Rise by Only 40,000 in November
CPI Growth Projected at 3.1%
Investor Caution Amid Concerns Over Slowing Employment and Persistent Inflation

On December 15 (local time), all three major U.S. stock indices closed lower. As the market grew increasingly cautious ahead of key economic indicators such as employment and inflation to be released this week, selling pressure was concentrated on artificial intelligence (AI) related stocks, leading to a downturn in share prices. The combination of a slowing labor market and the possibility of persistent high inflation further dampened investor sentiment.

A trader is working on the floor of the New York Stock Exchange (NYSE) in the United States. Photo by Reuters Yonhap News Agency

On this day, the Dow Jones Industrial Average, which is focused on blue-chip stocks, closed at 48,416.56, down 41.49 points (0.09%) from the previous trading day. The S&P 500 Index, which tracks large-cap stocks, dropped 10.9 points (0.16%) to 6,816.51, while the tech-heavy Nasdaq Composite fell 137.757 points (0.59%) to close at 23,057.413.

By sector, AI-related stocks generally showed weakness. Broadcom plunged 5.59%. Oracle lost 2.57%, and Microsoft (MS) declined by 0.78%. Concerns about the monetization of AI investments, fueled by Oracle’s disappointing earnings and increased capital expenditure outlook last week, continued into the first trading day of this week.

The stock market also trended downward last week. Due to the poor performance of AI-related stocks, the S&P 500 Index fell 0.6% over the week, and the Nasdaq Composite dropped 1.7%. In contrast, the Dow Jones Industrial Average, which has a relatively lower proportion of technology stocks, recorded gains.

David Wagner, Head of Equities at Aptus Capital Advisors, stated, "Right now, everyone is avoiding AI-related trades, and there is no doubt about it," but also predicted, "Ultimately, the market will be led by the core companies known as the 'Magnificent 7' (Nvidia, Apple, Alphabet, MS, Amazon, Meta, Tesla)." He emphasized, "The key factor that the market continues to underestimate is the (strong) operating leverage these companies possess."

The market is closely watching key economic indicators to be released this week. The U.S. Bureau of Labor Statistics (BLS) is scheduled to release the November employment report on December 16. According to financial information provider Morningstar, nonfarm payrolls in November are expected to increase by 40,000 from the previous month, with the unemployment rate projected at 4.4%. This is a significant slowdown compared to the 119,000 increase in nonfarm payrolls in September. This is interpreted as a sign that the labor market is gradually slowing, as companies become more cautious about new hiring amid tariff policies and economic uncertainty.

On the other hand, inflationary pressure is expected to remain significant. The Consumer Price Index (CPI) for November, to be released on December 18, is projected to show a 3.1% year-over-year increase in both headline and core CPI, a slight uptick from September’s 3.0%. The retail sales index for October, to be released on December 16, is expected to increase by 0.1% from the previous month, and whether this modest growth trend continues will be a key focus. The retail sales growth rate in September was 0.2%.

Jose Torres, Senior Economist at Interactive Brokers, analyzed, "Investors are hesitant to make bold moves ahead of the major economic indicators to be released."

With both a slowdown in employment and persistent high inflation occurring simultaneously, there are also mixed views within the Federal Reserve (Fed). Fed Governor Stephen Miran argued that monetary policy is unnecessarily restrictive, while John Williams, President of the Federal Reserve Bank of New York, assessed that monetary policy is close to neutral. Susan Collins, President of the Federal Reserve Bank of Boston, commented last week that supporting a rate cut was a "close call."

In the market, there is speculation that the Fed may prioritize employment over inflation, raising the likelihood of monetary easing if the November employment data shows further slowdown.

Chris Larkin, Managing Director at Morgan Stanley E*TRADE, said, "The Fed is still more focused on labor market weakness than on inflation," adding, "When it comes to the employment report, bad news is likely to be good news for the market." He added, "As long as employment does not contract sharply, a moderate slowdown in hiring could drive the Fed toward a dovish (monetary easing) policy stance."

In addition, on December 16, the S&P Global Manufacturing and Services Purchasing Managers’ Index (PMI) for December will be released, followed by weekly initial jobless claims on December 18, and the November existing home sales data on December 19. The series of data releases will provide a comprehensive view of the U.S. manufacturing, employment, and housing markets.

U.S. Treasury yields were slightly lower. The benchmark 10-year U.S. Treasury yield, a global bond market indicator, fell by 1 basis point (1bp = 0.01 percentage point) from the previous trading day to 4.18%, while the 2-year Treasury yield, which is sensitive to monetary policy, dropped by 2 basis points to 3.50%.