By Stephen Culp
NEW YORK (Reuters) - Megacap tech shares muscled the S&P 500 and the Nasdaq to higher closes on Monday as U.S. Treasury yields paused and investors readied for a busy central bank week.
Bitcoin surged, touching a new high after U.S. President-elect Donald Trump suggested he plans to set up a bitcoin strategic reserve.
The FANG group of tech and tech-adjacent momentum stocks outperformed, gaining 2.7% on the day.
"We’re continuing to see an uneven melt up of stocks. The rotation into value seems to have fizzled out, at least for now," said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York.
"There’s a risk-on type of mentality at that point that translates into stocks in a broader sense, and it continues to feed the view that under a Trump administration, the investment environment is going to be favorable to tech and new world-type investments," Pursche added.
The Federal Open Market Committee (FOMC) is due to convene on Tuesday for its last monetary policy meeting of 2024, which is expected to conclude with a 25 basis point cut in the key Fed funds target rate.
Investors will scrutinize the Fed's Summary of Economic Projections (SEC) and its "dot plot," which maps out the central bank's future rate cut path, which has become less certain in light of recent data showing sticky inflation amid a relatively robust economy.
"I’ll be listening for any forward-looking statements that address whether the Fed believes after this next cut that they are in a restrictive mode and when they intend to get to neutral, what conditions would be required in order to get to neutral," Pursche said.
A report from S&P Global (NYSE:SPGI) showed that U.S. business activity has accelerated its expansion this month, despite ongoing weakness in the manufacturing sector.
Among central bank actions elsewhere, Sweden's Riksbank is also expected to cut interest rates, while policymakers in Japan, Britain and Norway are seen holding steady.
Soft retail sales data from China underscored the need for more aggressive stimulus from Beijing.
The Dow Jones Industrial Average fell 110.21 points, or 0.25%, to 43,717.85, the S&P 500 rose 23.03 points, or 0.38%, to 6,074.12 and the Nasdaq Composite was up 247.17 points, or 1.24%, to 20,173.89.
European shares closed lower, weighed down by heavyweight luxury goods and energy shares in the wake of China's downbeat retail sales report.
French stocks weighed on European markets after Moody's unexpectedly downgraded the country's rating on Friday.
MSCI's gauge of stocks across the globe rose 1.62 points, or 0.19%, to 867.76.
The STOXX 600 index fell 0.12%, while Europe's broad FTSEurofirst 300 index fell 1.38 points, or 0.07
Emerging market stocks fell 4.42 points, or 0.40%, to 1,102.59. MSCI's broadest index of Asia-Pacific shares outside Japan closed lower by 0.38%, to 583.19, while Japan's Nikkei fell 12.95 points, or 0.03%, to 39,457.49.
Yields on 10-year U.S. Treasuries steadied near three-week highs as investors awaited the Fed's rate decision on Thursday.
The yield on benchmark U.S. 10-year notes fell 0.4 basis points to 4.395%, from 4.399% late on Friday.
The 30-year bond yield fell 1.2 basis points to 4.6023% from 4.614% late on Friday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 0.2 basis points to 4.243%, from 4.241% late on Friday.
The greenback was hovering near three-week highs as investors anticipated that the Fed could signal a more measured pace of easing in the coming year.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.01% to 106.86, with the euro up 0.07% at $1.0509.
Against the Japanese yen, the dollar strengthened 0.31% to 154.13.
Bitcoin, which has surged more than 50% since the U.S. presidential election, touched a new high, topping $106,000 after Trump indicated the possible establishment of a bitcoin reserve fund.
Bitcoin gained 3.10% to $106,015, while Ethereum rose 4.94% to $4,046.40.
Crude oil prices settled lower as soft data from China fed fears of softening demand from the world's largest oil importer.
U.S. crude fell 0.81% to settle at $70.71 per barrel, while Brent dropped to $73.81 per barrel, down 0.78% on the day.
Gold prices inched higher as the dollar eased ahead of the central bank decision.
Spot gold rose 0.17% to $2,652.29 an ounce. U.S. gold futures fell 0.15% to $2,652.00 an ounce.