The S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed Monday’s trading session in negative territory as tech stocks continued to head lower. Nvidia (NVDA), which is the largest component in both indexes, fell by 1.88% ahead of its earnings on Wednesday after the market close. Other tech companies, like Apple (AAPL), Palantir (PLTR), and Salesforce (CRM), closed in the red as well.
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Investors are gearing up for the release of September’s nonfarm payrolls and unemployment rate data on Thursday at 8:30 a.m. Eastern Time. The reports will guide the Fed in implementing its next rate cut decision on December 10. Labor market data released by the private sector during the government shutdown, such as Challenger, Gray & Christmas’ October layoffs data showing monthly job cuts at a 22-year high, pointed to continued labor market weakness.
Meanwhile, the odds of a 25 bps rate cut next month have continued to slide as several Fed officials have spoken in favor of a slow cutting cycle in order to address the risk of inflation remaining above the target of 2%. The odds currently sit at 42.9%, down from 62.4% a week ago and 93.7% a month ago.
Fed Vice Chair Philip Jefferson said on Monday that the “evolving balance of risks underscores the need to proceed slowly as we approach the neutral rate.” The central bank is set to release its October Federal Open Market Committee (FOMC) meeting minutes on Thursday, which could provide further direction on where rates are headed.
However, Fed Governor Chris Waller continued to reiterate his stance for a December rate cut, citing a weak labor market. Lower interest rates typically benefit the labor market by reducing borrowing costs for businesses, which encourages expansion and hiring. Waller is a top contender to replace Fed Chair Jerome Powell once his term expires in May 2026.
Amid the selloff, Morgan Stanley still expects solid gains for the S&P 500 (SPX) in 2026 with a year-end price target of 7,800, implying upside of 17% from current prices.
“Risk assets are primed for a strong 2026, powered by micro fundamentals, accelerating AI capex, and a favorable policy backdrop,” said the bank. In addition, Morgan Stanley expects earnings growth to accelerate to 17% in 2026 from its 2025 estimate of 12%.
The S&P 500 (SPX) closed with a 0.92% loss, while the Nasdaq 100 (NDX) fell by 0.83%.
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