The three major US stock indices all decline, and cryptocurrencies undergo a deep correction. December begins with volatility, creating a new six-month trend.

In the first trading week of December, global financial markets experienced significant adjustments. The US stock market declined across the board on Monday (December 1), ending the recent five-day winning streak, with market sentiment clearly turning cautious at the start of the month.

US Equity Indices Come Under Pressure, Early Signs of Volatility

US stock market closing data shows a softening trend: S&P 500 down 0.53% to 6,812.63 points, Nasdaq Composite retreating 0.38% to 23,275.92 points, and the Dow Jones Industrial Average plunging 427.09 points (0.9%) to 47,289.33 points. The three major indices synchronized a pullback, breaking recent upward momentum and indicating a potential shift in trading style for December.

Cryptocurrencies led the decline among global risk assets. Bitcoin temporarily dropped over 8% intraday, breaking below the $84,000 level, marking its worst single-day performance since March. The current Bitcoin price is $87.72K, with a 24-hour change of +0.24%. Ethereum also weakened, falling about 10% to a low of $2,719.27, with the latest price at $2.95K and a 24-hour change of -0.59%; Solana declined similarly by about 10%, now at $122.69, with a 24-hour change of -1.10%. The collective correction in cryptocurrencies has noticeably dragged down tech stocks.

Manufacturing Continues to Weaken, Economic Data Reveal Structural Issues

The latest survey from the Institute for Supply Management (ISM) reaffirmed manufacturing difficulties. US manufacturing activity in November contracted for the ninth consecutive month, with the PMI dropping from 48.7 to 48.2, well below the expansion-contraction threshold of 50, signaling ongoing weak order activity.

Tariff pressures remain a primary drag. According to the ISM report, import tariffs have led to a double challenge for factories: declining orders and rising input costs. Manufacturers of transportation equipment have begun implementing “more permanent changes,” including layoffs and shifting operations overseas. Several economists bluntly describe the current situation—Chief Economist Carl Weinberg states, “Manufacturing is sick.”

Despite weak orders, ISM’s prices paid index rose to 58.5, indicating input costs are still rising and suggesting ongoing upward pressure on goods prices. Factory employment is even more strained, contracting for the tenth consecutive month, with 67% of surveyed companies citing personnel management as a challenge rather than hiring as usual.

Crypto Leverage Risks and Liquidation Wave Spark Market Panic

The deep correction in cryptocurrencies is not merely a technical retracement but a result of leverage risk release. Ben Emons, founder and CIO of Fedwatch Advisors, pointed out that Monday’s sharp decline was mainly driven by approximately $400 million in concentrated liquidations, with some exchanges offering leverage up to 200x.

The open interest in Bitcoin perpetual contracts reaches as high as $7.87 trillion, while ETF leverage is only about $135 billion, indicating substantial hidden leverage risk within the system. If prices cannot break free from lows, similar liquidations will continue, further amplifying market volatility.

Cryptocurrency volatility shows a higher correlation with indices like Nasdaq, and since the market is still dominated by retail trading, its reaction mechanism is more sensitive, increasing overall fragility. Research from Grayscale indicates that open interest in perpetual contracts is declining, exchange trading volume remains weak, and risk appetite has noticeably decreased, suggesting that crypto assets may continue to face downward pressure in the short term.

Rising US Treasury Yields Restrict Valuation Sectors, Tech Stock Rotation Intensifies

US Treasury yields rose across the board on Monday, mainly influenced by the Bank of Japan Governor Ueda Kazuo’s signals of potential rate hikes, triggering a synchronized adjustment in global bond markets. The rise in US Treasury yields directly pressures sectors like real estate and utilities, becoming a significant drag on the S&P 500.

Within the tech sector, clear differentiation emerged. Broadcom and Super Micro Computer both fell more than 2%, reflecting profit-taking after earlier gains in AI supply chains; NVIDIA bucked the trend, rising over 1%, maintaining its leadership position in tech; Synopsys surged significantly, benefiting from NVIDIA’s large investment decisions. This indicates that the AI sector has entered a phase of structural revaluation, with capital favoring high-confidence assets while remaining cautious on high-valuation sub-sectors.

Retail Sector Rises Against the Grain, Holiday Season Provides Bottom Support

Despite overall market pressure, the retail sector stood out. Home Depot and Walmart both gained, with the retail-focused XRT ETF rising nearly 1%, accumulating over 7% gains in five days. Adobe Analytics projects consumers will spend $14.2 billion online on “Cyber Monday,” providing ongoing support for the retail sector.

In an environment of increasing macro uncertainty, retail has attracted short-term capital inflows. This reflects an internal market rotation: when risk assets are under pressure, defensive and consumer-related sectors become safe havens for funds.

New Highs Persist, Market Internal Strength and Weakness Accelerate

Despite the index weakness, 12 stocks in the S&P 500 hit 52-week highs, with 8 reaching all-time highs, a phenomenon worth noting:

• General Motors (GM) hit a record high for the first time since its 2010 IPO;
• Monster Beverage reached its highest level since its 1992 listing;
• Walmart hit a record high since its 1972 IPO;
• Synchrony Financial broke through its 2014 IPO peak for the first time;
• C.H. Robinson reached a new high since its 1997 IPO;
• Cummins hit its highest level since its 1947 IPO;
• Analog Devices (ADI) surpassed its record since 1972;
• Steel Dynamics set a new high since its 1996 IPO.

Conversely, only Copart among the S&P components hit a 52-week low. This stark contrast reinforces analysts’ view that: despite market volatility, the internal strength and weakness within US stocks are accelerating, and structural market rotation is far from over.

Fed Rate Cut Expectations Guide, Year-End Seasonality May Support the Market

The market has already priced in the Federal Reserve’s policy decision next week. CME FedWatch tool shows an 85% probability that the Fed will cut rates by 25 bps at the December meeting. However, Goldman Sachs economists note that internal dissent within the committee may temper more dovish pricing, and next week could see a “hawkish rate cut”—a cut accompanied by signals of a possible pause in easing.

Historically, since 1950, December has been the third-best month for the S&P 500, with an average gain of over 1%. Although short-term volatility may increase, this seasonal factor could continue to support investor expectations. Robert Schein, CIO of Blanke Schein Wealth Management, states that the market is currently in a “digestive phase,” but the overall environment still supports stock performance, believing that “with a high probability of rate cuts and continued easing of inflation, year-end momentum remains resilient.”

Overall, the market faces multiple tests in December—weak economic data, crypto leverage risks, rising US Treasury yields—but seasonal factors and Fed rate cut expectations may still provide rebound support. The key is that internal market strength and weakness are becoming the norm, and stock-picking skills are increasingly important.