Morning Bid: Small caps pick up baton, China rating hit

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Key Points

As the S&P500 (.SPX) stalled on Monday at its high for the year, taking a breather from last week's 'peak rates' rally, smaller U.S. stocks picked up the baton and are playing catchup into the yearend...

Global stock markets were off somewhat again on Tuesday, with Moody's decision to cut the outlook for China's sovereign credit rating on Tuesday adding even more pressure to the year's alarming market underperformance (.CSI300) there and clocking a five-year closing low for its benchmark stock index.. Monday proved to be a step back for the main U.S. stock indices (.SPX) and bond markets as they consolidated last week's surge on hopes the Federal Reserve is finally done tightening and ready to ease in 2024...

As the S&P500 fell back about 0.5% from Friday's 2023 closing peak, the Russell 2000 (.RUT) raced 1% higher to its highest in three months - and is now clocking annual gains of close to 7%...

And despite some concerns in Treasuries about a heavy investment grade corporate bond sale diary this week, yields fell back again ahead of Tuesday's bell as attention turned to this week's series of critical U.S. jobs market updates...

Moody's said the downgrade reflected growing evidence that authorities will have to provide more financial support for debt-laden local governments and state firms, posing broad risks to China's fiscal, economic and institutional strength...

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