Wall Street futures extend losses amid AI bubble worries; investors await key data for Fed rate cut cues

The American stock markets had seen sharp losses yesterday, with Dow Jones Industrial Average falling 1.18 percent to 46,590.24. The S&P 500 fell 0.92 percent and the Nasdaq Composite fell 0.84 percent. The indices have now fallen for six out of eight sessions.

On November 18, European markets also plunged, with UK's FTSE index, France's CAC and Germany's DAX falling up to 1.5 percent each. Asian markets also closed in the red, with Japan's Nikkei 225 and South Korea's KOSPI dropping more than 3 percent each. Hang Seng index meanwhile fell nearly 2 percent.

Indian stock markets accompanied global peers, snapping a six-session gaining streak to close in the red. Nifty 50 fell 0.40 percent (over 103 points) to close at 25,910. Sensex meanwhile fell 0.33 percent (278 points) to 84,673.02.

Fed rate cut decision:

A growing number of Federal Reserve policymakers are now showing willingness to not ease the American central bank's rates further. Market expectations for a 25 basis-point rate cut in December fell to nearly 46 percent from 50 percent earlier this week, CME Group's FedWatch tool showed, as reported by Reuters.

Short-term interest rate futures now show much lower chances of the rate-setting Federal Open Market Committee (FOMC) lowering its borrowing costs on December 10, when the Fed wraps up its last policy meeting of 2025. Earlier last week the contracts indicated a 67 percent likelihood of a cut.

The key government data reports will remain in focus as they will shed light on Fed’s possible decision during the upcoming FOMC meeting.

Nvidia earnings amid AI bubble worries:

Earlier last week, SoftBank sold stake worth $5.8 billion in Nvidia, igniting fears that the frenzy around artificial intelligence may have peaked. Recently, Morgan Stanley and Goldman Sachs CEOs warned that stock markets could be heading to a drawdown, while hedge fund manager Michael Burry, known for shorts on the US housing market ahead of the 2008 crash, bet against Nvidia and Palantir.

Nvidia shares have dropped nearly 8 percent in November so far, after rallying 1,200 percent in the past three years. "With every quarter that goes by, Nvidia earnings become more important in terms of clarification on where AI is moving and how much spending is being done," said Brian Stutland, chief investment officer of Nvidia investor Equity Armor Investments.

Other tech giant stocks also dropped in the pre-market session, with Amazon being down nearly 2 percent. This comes as Amazon raised $15 billion in its first US dollar bond sale in three years, joining a wave of jumbo tech debt deals. Facebook-parent Meta's shares meanwhile fell nearly 1 percent in the pre-market session.

Bitcoin plunge:

Bitcoin has seen significant volatility recently. The cryptocurrency dropped below the $90,000-mark briefly today for the first time in seven months, marking a fall of nearly 30 percent from its all-time high of around $126,000 which it had hit just a month ago in October.

Market participants said that a combination of doubts around future US interest rate cuts and the risk-averse mood in broader markets, which have wobbled after a long rally, was dragging down crypto.

(With inputs from Reuters)

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