Stocks Fall as Traders Turn Sellers, Warning of Volatility Ahead

According to Yahoo News, stocks fell on Tuesday, extending the Wall Street sell-off, with analysts warning that November's rally fueled by bets on interest rate cuts may have gone too far, forcing traders to take a step back. Markets surged last month as data pointing to slowing inflation and softer job markets combined with a dovish turn by Federal Reserve officials to stoke expectations they will next year begin loosening monetary policy. Those hopes were boosted Friday when Fed chief Jerome Powell said rates were "well into restrictive territory". More than one percentage point of reductions through to next December have been priced in by futures traders, according to Bloomberg News. However, observers said the euphoria may have caused investors to get ahead of themselves and the next few weeks could be a little bumpy, while they remained broadly upbeat about the new year. Morgan Stanley strategist Michael Wilson said in a note that this month could see "near-term volatility in both rates and equities" before positive seasonal trends and "January effect" provide a lift in January. All three main indexes in New York ended in the red, with the S&P 500 coming off a nine percent November rally. The selling continued in Asia, with Hong Kong tumbling more than two percent while Tokyo and Sydney shed more than one percent apiece. Traders are now awaiting the release later in the week of key US jobs data, with a miss to the downside of expectations likely to ramp up optimism for a rate cut in early 2024. However, a forecast-beating reading could jolt markets. That is followed next week by the Fed's policy meeting, where most watchers are tipping it to stand pat on rates, though its statement will be parsed for any clues about plans for the next few months.