Nasdaq sees megacap and AI stocks decline

Stocks slipped on Monday as investors questioned whether the market was getting ahead of itself following five straight winning weeks.

The Dow Jones Industrial Average shed 41.06 points, or 0.11 per cent, to close at 36,204.44. The S&P 500 dropped 0.54 per cent to 4,569.78. The Nasdaq Composite declined 0.84 per cent to 14,185.49 as investors sold Big Tech shares, which have led the market’s gains this year.

Alaska Air Group dropped 15 per cent after it agreed to acquire rival Hawaiian Airlines for $1.9 billion. The move is part of Alaska’s efforts to expand along the West Coast.

Interestingly, small-cap stocks have stood out recently, benefiting from the expanding market rally driven by Fed policy and soft landing expectations. Jefferies noted that the Russell 2000 (R2K) is trading at a modest 13 per cent premium to the S&P 500, which is near recent lows and significantly lower than the relative valuation seen during the Global Financial Crisis (GFC), suggesting the potential for small-cap outperformance in the near future, historically associated with such levels of underperformance.

Bitcoin passed the $42,000 mark to notch a 20-month high, driven by expectations of U.S. interest rate cuts and speculation about the approval of exchange-traded spot bitcoin funds, dispelling previous market concerns stemming from crypto-business failures. In response, Marathon Digital and Riot Platforms both jumped more than 8 per cent. Microstrategy and Coinbase gained more nearly 7 per cent and 6 per cent, respectively.

Turning to US sectors, Real Estate was the best performer overnight. Communication Services was the worst.

Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, has rejected the idea of phasing out fossil fuels at the UN's COP28 climate talks, setting the stage for challenging negotiations in Dubai. Despite a tentative "phasedown/out" proposal in the draft agreement, the world's largest oil exporter firmly stated its opposition to such measures, signalling potential obstacles in reaching a consensus on climate action.

Shifting to the Australian landscape, today is the RBA’s final policy meeting of 2023. Many analysts are suggesting that the RBA will maintain interest rates given soft economic data and the RBA's commitment to preserving the labour market.

Futures

The SPI futures are pointing to a 0.53 per cent fall.

Currency

One Australian dollar at 8:25 AM was buying 66.19 US cents.

Commodities

Gold has lost 2.02 per cent. Silver has lost 3.74 per cent. Copper has lost 2.63 per cent. Oil has fallen 0.97 per cent.

Figures around the globe

European markets closed mixed. London’s FTSE lost 0.22 per cent, Frankfurt gained 0.04 per cent, and Paris closed 0.18 per cent lower.

Turning to Asian markets, Tokyo’s Nikkei fell 0.6 per cent, Hong Kong’s Hang Seng lost 1.09 per cent while China’s Shanghai Composite closed 0.29 per cent higher.

The Australian share market closed 0.73 per cent higher at 7,124.65.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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