The robust stock market rally that characterized much of 2025 took a breather on Monday, December 1, as a sharp downturn in cryptocurrencies and turbulence in global debt markets prompted investors to pull back from riskier assets. The historically strong month for equities began on a cautious note, interrupting the S&P 500's longest monthly winning streak since 2021.
Crypto Rout and Equity Pressure
A significant selloff in digital currencies rippled through financial markets, contributing to a risk-off sentiment. Bitcoin prices plunged approximately seven percent, hovering near the $85,000 mark. The decline triggered the liquidation of nearly $1 billion in leveraged crypto positions, amplifying a broader industry slump. On Wall Street, the S&P 500 index briefly fell below the 6,800 level before recovering some of its losses by the session's close. Performance was mixed among megacap technology stocks, with Alphabet Inc. declining while Nvidia Corp. managed a bounce after a prior selloff.
Global Bond Yields Climb
The day's volatility was not confined to equities and crypto. A surge in Japan's benchmark government bond yields to their highest level since 2008 sent waves through global fixed-income markets. This move, driven by expectations that the Bank of Japan will further increase interest rates, pressured sovereign debt worldwide. The yield on the key 10-year U.S. Treasury note rose by eight basis points to 4.10%. Despite the reduced appetite for risk, U.S. Treasuries also faced selling pressure to start the week.
Economic Data and Fed Watch
Investors are closely scrutinizing economic indicators for clues on the Federal Reserve's next policy move. Market speculation has grown that the U.S. central bank is likely to ease monetary policy at its upcoming meeting on December 9-10. However, key data, including the crucial jobs report, will not be released until after that decision. Attention this week is focused on Friday's report on the Fed's preferred inflation gauge, which is anticipated to show stable but stubborn price pressures.
Other relevant data released Monday showed U.S. factory activity contracting in November at the fastest pace in four months, indicating a softening in orders. Analysts offered varied perspectives on the market's direction. "There's some risk aversion creeping into the markets to start the week," noted Kyle Rodda, a senior market analyst at Capital.com. "At the moment, it looks benign and without a fundamental impetus."
Looking ahead, some strategists remain optimistic about the foundation for equities. "We have highlighted that stocks historically performed best when the economy is not in recession and the Fed is cutting interest rates," said Ulrike Hoffmann-Burchardi of UBS Global Wealth Management. She added that "robust earnings growth expectations should drive further equity gains," with estimates for major markets in the coming year ranging between 7% and 14%.
