Market Volatility: Investors Weigh Economic Data Amid AI Optimism
The US stock market experienced a rollercoaster ride on Tuesday, with early gains giving way to losses as investors digested new economic data and Nvidia’s ambitious artificial intelligence plans. The S&P 500 fell around 0.6%, while the tech-heavy Nasdaq Composite lost roughly 1.4%. The Dow Jones Industrial Average bounced around during the mid-morning session but fell about 0.1% by the afternoon.
Economic Data: A Mixed Bag
The Institute for Supply Management’s manufacturing PMI indicated the manufacturing sector continued to expand last month, although the prices paid index jumped to a nearly two-year high of 64.4, up from the prior 58.2. This surge in prices has raised concerns about inflation, with Capital Economics North America economist Thomas Ryan noting that it is consistent with PCE supercore inflation remaining at 3.5% until the middle of next year.
Meanwhile, JOLTS job openings rose more than expected during the month of November, with 8.1 million jobs open at the end of the month. However, fewer hires were made compared to the previous month, and the quits rate, a sign of confidence among workers, fell to 1.9% from 2.1% in October.
Fed Watch: Rate Cut Bets Pushed Back
Following the release of the economic data, traders scaled back rate cut bets, placing a less than 50% chance the central bank cuts rates ahead of its June meeting, per the CME FedWatch Tool. This shift in sentiment was driven by the strong rise in job openings and the prices paid index, which suggests the inflation fight is not yet finished.
Corporate News: Nvidia’s AI Ambitions
Nvidia shares reversed gains to fall around 5% after hitting a record-high close, despite CEO Jensen Huang’s CES keynote revealing a new AI superchip among other planned products. Other chip stocks extended their rally, with Micron Technology up about 4% and Asia names making gains.
Vaccine Makers’ Stocks Rise
Vaccine makers’ stocks rose Tuesday following the first reported bird flu death in the US and an uptick in COVID-19 cases, per CDC data. Moderna surged nearly 12%, while Pfizer rose a more modest 1.4% midday Tuesday. BioNTech, CureVac, and Novavax also saw significant gains.
Dollar Strengthens
The US dollar pushed higher on Tuesday, rebounding after the currency was on track for a one-week low following reports President-elect Donald Trump won’t commit to an aggressive tariff plan. The dollar’s strength was driven by the strong rise in job openings and the prices paid index, which suggests the inflation fight is not yet finished.
Trump’s Tariff Agenda
The president-elect on Monday denied a Washington Post report that his team is considering more targeted measures, which would be more promising for global growth. The watch is on for more clarity around Trump’s tariff agenda, which could have significant implications for the economy and markets.
Data Centers and AI Investment
President-elect Donald Trump announced a new multibillion-dollar foreign investment to build new data centers across the United States as interest and exploration of artificial intelligence intensify. The investment, led by Damac Group, will be used to create “massive new data centers” across the Midwest and Sunbelt regions “and keep America on the cutting edge of technology and artificial intelligence.”
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