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US and global stocks to decline this week amid mixed Fed messages, concerns about tech valuation

Wall Street stocks shook in range-bound, but choppy trading on Friday. Rising hopes for a December rate reduction from the U.S. Federal Reserve was countered with persistent concerns about lofty valuations of tech companies.

The tech-laden Nasdaq had a modest decline, while the S&P 500 had a slight increase, and the Dow Jones Industrial Average was heading more decisively in the positive direction.

The benchmark Treasury yields fell, the dollar remained steady and bitcoin was sharply lower.

The S&P 500, the Nasdaq, and other world markets are on course to post their biggest weekly percentage losses since U.S. president Donald Trump shook the market with his major announcement of tariffs in April.

The solid earnings of AI pioneers, notably Nvidia, only temporarily eased concerns that AI stocks are overpriced, and may be due for a correction.

After a government shutdown that ended recently, the Fed finally got to see the current state of the job market, and it was a surprise to find the rate of unemployment ticking up.

Financial markets have increased the likelihood that this will be the Fed's third and final cut in interest rates for this year. CME's FedWatch set the odds to 73.3%. This is a big jump from Thursday's 39.1%.

The messages from policymakers are mixed. New York Fed president John Williams said that the Fed may still be able to cut rates in near-term, but Dallas Fed president Lorie Logan urged them to remain on hold until the central bank assessed the impact of current rates on economy.

Oliver Pursche is a senior vice president of Wealthspire Advisors in New York. There are ongoing concerns over valuation, the Fed's future move and unemployment.

Pursche said that "the fourth quarter has seen a rough start, even though it is usually the best for stocks, in terms of performance."

The Dow Jones Industrial Average increased 200.09 points or 0.44% to 45,952.35, while the S&P 500 gained 3.54 points or 0.04% to 6,541.66. Meanwhile, the Nasdaq Composite dropped 81.74 or 0.38% to 21,993.43.

European stocks fell on renewed concerns over stretched technology valuations.

The MSCI index of global stocks fell by 4.07 points or 0.42% to 964.46.

The pan-European STOXX 600 fell by 0.44% while Europe's FTSEurofirst 300 fell by 0.43%.

Emerging market stocks dropped 2.81% to 1333.04. MSCI's broadest Asia-Pacific share index outside Japan closed at 684.69 - a 2.83% decrease. Japan's Nikkei dropped 2.40% to 48625.88.

The dollar was expected to gain a little each week, while the yen gained support after Japanese officials intensified their verbal interventions to stop the currency's fall.

The dollar index (which measures the greenback versus a basket including the yen, the euro and other currencies) rose by 0.12%, to 100.28. However, the euro fell by 0.22%, at $1.1502.

The dollar fell 0.73% against the Japanese yen to 156.33.

Cryptocurrencies fell to multi-month lows as a result of a wider flight away from riskier assets. Bitcoin dropped 5.08% to $82 789.98. Ethereum fell 6.44% to 2,692.87.

U.S. Treasury yields fell as Fed rate-cut bets increased.

The yield on the benchmark U.S. 10 year notes dropped 3.9 basis points from 4,104% at late Thursday to 4.065%.

The 30-year bond rate fell 1.2 basis point to 4,7199%, from 4,732% at the end of Thursday.

The yield on the 2-year bond, which is usually in line with expectations of interest rates for the Fed fell by 5.3 basis points, to 3.505% from 3.558% at late Thursday.

The U.S. has been pushing for a peace agreement between Russia and Ukraine.

U.S. crude dropped 2.2% to $57.71 per barrel. Brent was down to $62.21 per barrel on the same day, a drop of 1.81%.

Gold recovered from earlier losses following dovish Fed remarks that increased the likelihood of a rate cut in December. Gold spot fell by 0.31%, to $4.064.19 per ounce. U.S. Gold Futures rose by 0.35% to $4.070.90 per ounce.

(source: Reuters)