Stocks drop, oil slips to start shortened holiday week

US stocks sank on Monday as Wall Street plunged into a holiday-shortened trading week.

The stock and bond markets will be closed Thursday for Thanksgiving and will end trading at 1 PM ET on Friday.

The S&P 500 (^GSPC) fell 0.4%, while the Dow Jones Industrial Average (^DJI) fell about 45 points, or 0.1%. The tech-heavy Nasdaq Composite (^IXIC) fell 1.1%.

Investors valued Fedspeak higher in the final hour of Monday’s session. San Francisco Federal Reserve Bank President Mary Daly said officials could hike the US central bank’s policy rate above 5% if inflation doesn’t ease. Daly also noted that canceling a 75 basis point hike in December is “premature” and “nothing is off the table.”

“I tend to be on the more aggressive side of distribution,” Daly said on a conference call, referring to the spectrum of his colleagues from the most aggressive on tightening policy to the least.

Oil extended losses on reports that Saudi Arabia and other OPEC countries are discussing increased production. A string of COVID-related deaths in China has also resurfaced fears that the country may roll out new restrictions to mitigate recent outbreaks. Both events sparked demand concerns, with West Texas Intermediate (WTI) crude futures dipping below $80 a barrel.

The US dollar gained against other currencies on concerns over the COVID picture in China.

Bitcoin (BTC-USD) fell 4% below $16,000 and ethereum (ETH-USD) fell 6% to just under $1,100 as the impact of the collapse of cryptocurrency exchange FTX continued to permeate the i cryptocurrency markets.

Meanwhile, shares of Disney (DIS) soared 6% despite a down day elsewhere in the market after the media giant made a surprise Sunday announcement that former chief executive Bob Iger will return to lead the company as CEO, effective immediately.

Disney CEO Bob Iger speaks during the Bloomberg Global Business Forum in New York City, New York, U.S., September 25, 2019. REUTERS/Shannon Stapleton

Monday’s moves come after a lackluster week on Wall Street, with sentiment weighed down by renewed worries about higher interest rates. The benchmark S&P 500 fell about 0.7% over the period and the Nasdaq 1.6%, while the Dow was roughly unchanged.

Historically, the week of Thanksgiving tended to be bullish. Over the past half-century, the S&P 500 has gained an average of 0.5% during the holiday week and has delivered a positive return 68% of the time, according to data from Schaeffer’s Investment Research. The Wednesday before Thanksgiving was positive 78% of the time, with an average gain of 0.3%, and the day after, 66% of the time, with an average increase of 0.2%.

“The stock market’s ‘low inflation’ bump lost some momentum last week, but bulls hoping the rally gets back on track could look to historic trading trends around Thanksgiving,” Chris Larkin, chief executive officer of trading at E*Morgan Stanley TRADE said in a statement. “While people take a breather over Thanksgiving, the stock market isn’t so inclined: Even in a short trading week, the SPX since 1950 has moved nearly as much during the week of Thanksgiving as during its trading period average of five days.”

Investors are in a quiet few days. The minutes of the Federal Reserve’s November rate-setting meeting scheduled for Wednesday are the highlight of a light economic calendar this week. On the enterprise side, other earnings are expected for the release, including Dell Technologies (DELL), HP (HPQ), Dollar Tree (DLTR), and Nordstrom (JWN).

NEW YORK, NEW YORK - NOVEMBER 17: Traders work on the floor of the New York Stock Exchange during morning trading on November 17, 2022 in New York City.  Shares are expected to decline as the stock market opens with interest rates rising as Federal Reserve officials signal further interest rate hikes to continue slowing inflation.  (Photo by Michael M. Santiago/Getty Images)

NEW YORK, NEW YORK – NOVEMBER 17: Traders work on the floor of the New York Stock Exchange during morning trading on November 17, 2022 in New York City. (Photo by Michael M. Santiago/Getty Images)

A reading of the minutes from the FOMC, which sets monetary policy, is likely to show officials plan to hike rates by half a point at their December meeting.

DataTrek’s Nicholas Colas points out that the odds of more aggressive monetary policy next year rose last week, both in terms of where the federal funds rate will peak and where it will end up next year.

About a week ago, futures indicated 81% to 19% odds on a 50 basis point rate hike versus 75 basis points next month following a softer consumer price index. After aggressive claims by officials that more rate hikes are needed, the odds of a 0.75% hike increased slightly to 24%.

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Alexandra Semenova is a reporter at Yahoo Finance. Follow her on Twitter @alexandraandnyc

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