The stock market dropped Monday, lead by declines in technology. The focus is now squarely on Tuesday’s jobs data.
The Dow Jones Industrial Average fell 0.1%, while the S&P 500 dropped 0.2% and the tech-heavy Nasdaq Composite tumbled 0.6%.
Many stocks were in the green, but market participants are locked in selling mode with tech stocks. They’re taking profit after years of outperformance, especially as risks pile up. The market is concerned about returns on the massive data center investments that software companies are making to build out their artificial intelligence capabilities. Worry is also emerging that, if the software space curbs its data center investments, demand for AI data center chips will drop, hurting chip makers.
The bond market also didn’t help tech on Monday.
The 10-year Treasury yield rebounded from its intraday low of about 4.155% to 4.181%. It won’t go below 4%, where it’s traded above for several months. The economy is still growing moderately, keeping inflation above the Federal Reserve’s target. The problem: Higher long-dated bond yields hurt tech stocks, which are valued on the basis that a bulk of their profits will come many years in the future.
Monday saw some selling because the market is nervous about a few factors, including the Fed.
Clarity will come — and help set the market’s direction for the next few months — on Tuesday. That’s when November jobs data are released, with economists expecting 45,000 jobs to have been added.
The market wants to see a growing jobs market, but not a labor picture that’s so hot that the Fed can’t cut rates a few more times.
“This week’s jobs data could be more important for equities’ perception of interest rate policy going forward than last week’s FOMC meeting,” writes Morgan Stanley’s chief U.S. equity strategist Mike Wilson.
And that’s why Tuesday is so crucial — regardless of how the market traded Monday.