US stocks have closed modestly lower, weighed down by a jump in US government bond yields and economic data that showed tariffs remained a drag on the manufacturing sector, as investors looked toward the Federal Reserve's policy announcement next week.
The Institute for Supply Management's survey showed US manufacturing contracted for a ninth straight month in November, as factories dealt with slumping orders and higher prices as the effect from tariffs lingered.
Markets have largely priced in a rate cut from the Fed at the conclusion of its two-day policy meeting on December 10. They are pricing in an 85.4 per cent chance of a 25 basis-point cut, according to CME's FedWatch.
The Dow Jones Industrial Average fell 427.09 points, or 0.90 per cent, to 47,289.33, the S&P 500 lost 36.46 points, or 0.53 per cent, to 6,812.63 and the Nasdaq Composite lost 89.76 points, or 0.38 per cent, to 23,275.92.
Greater expectation for Fed rate cuts
While many policymakers have struck a cautious tone, signals from a few key voting members in recent weeks, along with reports that White House economic adviser Kevin Hassett is a leading contender to succeed Fed Chair Jerome Powell, have heightened expectations for further interest rate cuts in the months ahead.
Powell was scheduled to speak after the market close but was unlikely to address monetary policy due to the proximity to the central bank's policy meeting.
Investors are also waiting for a delayed September report on the Personal Consumption Expenditures Price Index, the Fed's preferred inflation gauge, due on Friday.
Crypto stocks fall
Coinbase, which ended down 4.8 per cent, and US-listed shares of Bitfarms off 5.7 per cent, were among the crypto stocks that showed significant weakness, as bitcoin stumbled nearly 6 per cent and at one point dropped below $US85,000. The crypto market has lost more than $US1 trillion in value since hitting a record of around $US4.3 trillion, according to CoinGecko.
Strategy, the world's largest holder of the cryptocurrency, ended 3.3 per cent lower after tumbling as much as 12 per cent. It cut its earnings forecast for 2025, citing a weak run in bitcoin.
