[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

All three major indices of the U.S. stock market closed lower on December 15 (local time). As the market grew increasingly cautious ahead of the release of key economic indicators such as employment and inflation this week, selling pressure intensified, particularly among artificial intelligence (AI)-related stocks, leading to a decline in share prices. Investor sentiment weakened as concerns about both a slowdown in the labor market and the potential persistence of high inflation converged.

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, ended the session 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, fell by 10.9 points (0.16%) to close at 6,816.51, while the tech-heavy Nasdaq index dropped 137.757 points (0.59%) to finish at 23,057.413.

By sector, AI-related stocks were broadly weak. Broadcom plunged 5.59%. Oracle declined by 2.57%, and Microsoft (MS) dropped 0.78%. Following last week’s disappointing results from Oracle and its upward revision of capital expenditure forecasts, concerns about the monetization of AI investments resurfaced and persisted into the first trading day of this week.

The stock market also showed a downward trend last week. Due to the poor performance of AI-related stocks, the S&P 500 index fell by 0.6% over the week, and the Nasdaq index dropped by 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 that," but he also predicted, "Ultimately, the market will be driven by the so-called 'Magnificent 7'-Nvidia, Apple, Alphabet, Microsoft, Amazon, Meta, and Tesla." He emphasized, "The key factor that the market still underestimates is the (strong) operating leverage these companies possess."

The market is closely watching the major 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 compared to the previous month, with the unemployment rate projected at 4.4%. This represents a significant slowdown compared to the 119,000 increase in nonfarm payrolls in September. Amid tariff policies and economic uncertainty, companies have become more cautious about new hiring, which is interpreted as a sign that the labor market is gradually slowing.

On the other hand, inflationary pressures are still expected to be significant. The Consumer Price Index (CPI) for November, to be released on December 18, is projected to show both headline and core CPI rising by 3.1% year-on-year, a slight increase from September’s 3.0%. The November retail sales index, to be released on December 16, is expected to increase by 0.1% from the previous month, and whether this modest growth trend will continue is a key point of interest. 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 that will be released soon."

Amid the simultaneous occurrence of a slowdown in employment and persistent inflation, there are also mixed views within the Federal Reserve (Fed). On this day, 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 Olsen, President of the Federal Reserve Bank of Boston, commented last week that supporting a rate cut was a "precarious decision."

There are also expectations in the market that the Fed may prioritize responding to employment over inflation, increasing the likelihood of monetary easing if the November employment data shows further weakening.

Chris Larkin, Managing Director at Morgan Stanley E*TRADE, said, "The Fed still remains more focused on labor market weakness than on inflation," adding, "In the employment report, bad news is more likely to be good news for the market." He added, "As long as employment does not contract sharply, a gradual slowdown in employment could drive the Fed towards 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. Through the release of these indicators, it will be possible to gauge the overall state 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 session to 4.18%, while the 2-year U.S. Treasury yield, which is sensitive to monetary policy, dropped 2 basis points to 3.50%.