S&P 500 and Nasdaq Outlook as CPI and Fed Meeting Shape Year-End Moves

What’s Driving Markets Today

The S&P 500 and Nasdaq pulled back on Monday, led by sharp declines in semiconductor stocks and mixed performances across other sectors. Nvidia’s regulatory troubles and AMD’s downgrade hit the tech-heavy indices, while traders awaited key Consumer Price Index (CPI) data on Wednesday. This inflation report is expected to heavily influence the Federal Reserve’s policy decision at its final meeting of the year.

Nvidia and AMD Lead Tech Sector Declines

Nvidia shares dropped 3% after China’s market regulator launched an antitrust investigation into the company, citing potential violations of competition law. Nvidia, a major player in artificial intelligence and a market leader in 2024, has rallied 179% this year. However, the news weighed heavily on the semiconductor index, which fell 0.3%.

AMD suffered a steeper decline, losing 3.3% after Bank of America downgraded the stock from “buy” to “neutral.” The bank highlighted rising competition in artificial intelligence chips, particularly against Nvidia. Other prominent tech stocks also struggled, with Tesla sliding 1%, Meta shedding 2%, and Netflix down nearly 3%.

Energy Sector Outshines Broader Market Weakness

While most sectors traded lower, energy stocks provided a bright spot, gaining 0.7% as oil prices remained steady. APA Corporation led the gains, surging over 5%, while Occidental Petroleum and Valero Energy rose 2.7% each. Materials and healthcare sectors also posted modest gains, in stark contrast to the 1% drop in communication services, the worst-performing sector of the day.

Key Data to Shape December Trading

Attention is now squarely on Wednesday’s CPI data, expected to show a 0.3% monthly increase and a 2.7% rise year-over-year. This follows Friday’s labor market report, which revealed a higher unemployment rate of 4.2%, signaling potential easing in the labor market. The Fed is widely expected to deliver a 25-basis-point rate cut at its December 17–18 meeting, with market odds for the move rising to 89%. Traders will be looking for confirmation of a softer inflation trend to reinforce the case for continued easing.

Market Outlook as Year-End Approaches

Markets remain cautiously optimistic about a year-end rally, supported by seasonal trends and the likelihood of a dovish Federal Reserve stance. A softer CPI report could propel equities higher, particularly in sectors like energy and materials, which have shown relative strength. However, stronger inflation data or prolonged tech sector weakness could reintroduce volatility. Overall, the broader market appears positioned for moderate gains, but traders should monitor inflation metrics closely.