U.S. stocks extended declines in midday trading on Monday, while the dollar and Treasury yields stabilized. Investors appeared to be consolidating gains from the market’s robust December rally as they awaited a crucial inflation report later in the week.
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Tech Sector Leads Market Decline
Big tech stocks, led by Nvidia’s 2.4% pullback, spearheaded the market downturn into the afternoon session. The Nasdaq Composite fell 0.4%, or 82 points, while the S&P 500 declined 0.4%, or 24 points.
Mondelez Explores Potential Hershey Takeover
Shares of Hershey Company (HSY) were temporarily halted on the New York Stock Exchange following reports that Mondelez International (MDLZ) is considering a takeover bid for the confectionery giant.
Bloomberg News initially reported the potential acquisition, which could value Hershey at over $40 billion. Mondelez, with a market capitalization of approximately $85 billion, previously abandoned a takeover attempt in 2016. Hershey’s dual share structure, with Class B stock granting a trust 80% voting power, and the requirement for approval from the state of Pennsylvania pose significant hurdles to a successful takeover.
Despite the challenges, Hershey shares surged 18.2% to $206.47 before settling around $200.28, pushing the stock into positive territory for the year.
Mixed Signals at Market Open
The S&P 500 opened with a marginal decline of 0.05%, or 3 points, while the Nasdaq dipped 0.01%, or 4 points. Conversely, the Dow Jones Industrial Average gained 45 points, and the Russell 2000 mid-cap index rose 0.57%, or 13 points.
Chris Larkin, managing director for trading and investing at E*TRADE from Morgan Stanley, noted the underlying bearish sentiment despite record highs for stocks last week. He highlighted the weekly losses in the Dow and Russell 2000, and the fact that only three of the eleven S&P 500 sectors posted positive returns. Friday’s strong jobs report raised concerns about potentially higher-than-expected inflation data this week, but Larkin suggested that a significant increase would be needed to deter the Federal Reserve from implementing another rate cut next week.
Activist Investors Target Macy’s
Macy’s (M) shares rallied as activist investors continued to push for changes at the department store chain.
Barington Capital Group and Thor Equities LLC are the latest firms urging significant actions, including the divestiture of Bloomingdale’s and Bluemercury, alongside cost reductions and capital spending cuts.
Macy’s responded with a statement affirming its commitment to acting in the best interests of all shareholders and engaging with them, including Barington and Thor, to advance initiatives and achieve long-term goals. Macy’s shares jumped 3.8% in premarket trading, indicating an opening price of $17.05.
MicroStrategy Expands Bitcoin Holdings
MicroStrategy (MSTR) shares dipped after the tech company, led by prominent Bitcoin advocate Michael Saylor, disclosed further Bitcoin acquisitions.
The company purchased 21,550 Bitcoins for approximately $2.1 billion between December 2 and December 8, coinciding with Bitcoin’s historic surge past $100,000. To finance the purchase, MicroStrategy sold around 5.4 million shares for approximately $2.13 billion. MicroStrategy shares fell 2.05% in premarket trading, indicating an opening price of $386.90.
China Probes Nvidia Acquisition
Nvidia (NVDA) shares declined in early trading following the launch of an antitrust investigation by Chinese authorities into the chipmaker’s 2020 acquisition of Mellanox Technologies.
This move, perceived as the latest escalation in tech-related trade tensions between the U.S. and China, was initiated by the State Administration for Market Regulation (SAMR). It follows a third round of export restrictions imposed by the Biden administration on China-bound technology earlier this month. Nvidia shares were down 1.8% in premarket trading, suggesting an opening price of $139.81.
Global Market Overview and Economic Outlook
Stocks closed higher on Friday, with the S&P 500 and Nasdaq reaching new all-time highs. A moderate November jobs report reinforced expectations for a December Federal Reserve interest rate cut, while strong consumer spending over the Thanksgiving weekend bolstered confidence in continued economic growth.
This week’s November inflation report, due Wednesday, is expected to further support this outlook, with investors anticipating only minor changes in price pressures. However, geopolitical risks, particularly the collapse of Bashar Al-Assad’s regime in Syria, could impact market gains. Global oil prices reacted to these concerns, with Brent crude rising to $71.92 per barrel and U.S. WTI futures reaching $68.06 per barrel. Futures contracts indicated a slight dip for the S&P 500 and Dow Jones Industrial Average at the opening bell, while the Nasdaq was priced for a modest decline. Benchmark 10-year and 2-year Treasury note yields eased slightly. The U.S. dollar index weakened against a basket of global currencies.
In overseas markets, reports of new stimulus measures in China, including monetary policy easing, boosted the Hong Kong stock market. This optimism also lifted Europe’s Stoxx 600 to a six-week high. The market’s focus remains on the upcoming November inflation data, which will play a crucial role in shaping investor sentiment and influencing the Federal Reserve’s monetary policy decisions. This report is expected to provide further insights into the strength of the economic recovery and the trajectory of inflation in the coming months.
