Evidence has emerged that the strong year-end rally was boosted by short covering, according to Raymond James.

“Fuel for this rally is aided by short interest, and that fuel is getting used up,” the Wall Street firm’s strategists said in a note.

They noted that the trailing 30-day correlation of short interest to returns of S&P 500 constituents the past month have spiked higher. Short covering occurs when a short seller buys back shares in order to close out an open short position — returning borrowed shares — in an attempt to limit losses that also drives further drive up the price of the underlying security.

“We would suspect there may be 1-2 weeks at most of the short covering fuel before we are at the correlation extremes seen earlier this year,” Raymond James said.

— Yun Li

The Dow was on pace for a narrower loss than the other two major indexes in Monday’s session, due in part to a group of advancers.

The blue-chip index was just 0.2% lower. By comparison, the S&P 500 and Nasdaq Composite, which have both performed better over the course of 2023, are tracking to close down by 0.7% and 1%, respectively.

Part of the Dow’s outperformance came from gains of more than 3% in 3M and 1% in Merck, Nike and Home Depot. Those advances helped counterbalance the market selloff.

Still, the index was slated to end lower along as the broader market struggled. Technology stocks Intel and Salesforce were the worst performers in the average, with both poised to finish nearly 4% in the red.

— Alex Harring

Oppenheimer Asset Management is encouraged by this quarter’s market rally.

“We remain positive on stocks and consider the broadening of the rally in equities across sectors and market capitalizations to be a constructive development,” analyst John Stoltzfus wrote in a Monday note.

Third-quarter earnings results have been stronger than expected, with earnings growth of 4.5% from a year earlier on revenue gains of 1.9%, according to the note. Eight out of 11 of the S&P sectors are showing positive earnings growth, with four — communication services, consumer discretionary, financials and technology— gaining at double-digit rates.

The current year-end rally from the lows in October is constructive, Stoltzfus wrote, adding that, to be sure, it also raises some concern that gains during the fourth quarter may have taken equities to overbought levels.

“We are not getting bearish but can remember a tendency for powerful rallies from year end to be met with some questioning on any catalyst for profit taking without FOMO in the first quarter or second quarter of the new year,” the analyst said.

— Pia Singh

Oil prices continued to decline on Monday despite production cuts announced by OPEC and its allies.

The West Texas Intermediate contract for January fell $1.03, or 1.39%, to to settle at $73.04 a barrel, while the Brent crude contract for February dropped 85 cents, or 1.08%, to settle at $78.03 a barrel.

Oil futures have declined 6% since Wednesday’s close.

Several OPEC members and allied nations such as Russia, called OPEC+, announced last Thursday voluntary supply cuts of 2.2 million barrels per day for the first quarter of 2024.

But traders are skeptical that the group will actually deliver on the promised reductions, sending oil prices lower.

Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg Monday that the curbs could continue beyond the first quarter of 2024. Prince Abdulaziz said he is confident that members will deliver on the announced reductions.

— Spencer Kimball

The three major indexes continued trading lower as the final hour kicked off.

The Dow and S&P 500 slid 0.2% and 0.7%, respectively, as of shortly after 3 p.m. ET. The Nasdaq Composite was the worst performer of the three, shedding slightly more than 1%.

— Alex Harring

Two ETFs tied to the home-construction industry hit highs not seen in multiple years on Monday.

The iShares U.S. Home Construction ETF (ITB), which was created in 2006, hit an intraday high never seen before. The fund was helped by gains in Lowe’s, Dream Finders, Hayward Holdings and LGI Homes.

Meanwhile, the SPDR S&P Homebuilders ETF (XHB) at one point touched its highest level since December 2001. In addition to Lowe’s, Dream Finders and LGI, the fund was also aided by Tempur Sealy, MDC Holdings, Home Depot, Williams-Sonoma and Floor & Decor.

Both ETFs were last up by around 0.5%.

— Alex Harring, Gina Francolla

The voluntary oil production cut adopted by seven OPEC+ nations can “absolutely” continue past the first quarter if needed, Saudi Arabia’s energy minister told Bloomberg in an interview Monday.

OPEC+ includes OPEC members as well as major oil-producing allies such as Russia.

The production cuts of 2.2 million barrels per day agreed last week will only be withdrawn through a “phased-in” approach based on market conditions, Saudi Energy Minister Price Abdulaziz bin Salman said.

The production cuts have been met with skepticism by traders with oil prices having fallen about 5% from last Wednesday through Friday’s close.

Oil continued to fall on Monday with U.S. crude down 0.51% at $73.69 a barrel and global benchmark Brent down 0.38% at $78.58 a barrel.

“I honestly believe that the delivery of the 2.2 million will happen,” Prince Abdulaziz told Bloomberg. “I honestly believe that 2.2 million will overcome even the usual inventory build that usually happens in the first quarter.”

— Spencer Kimball

Alaska Air Group is on track to notch its worst day since the early days of the pandemic after agreeing to acquire a rival.

Shares tumbled nearly 15% on Monday. If that holds, it would be the worst day since March 18, 2020, when shares fell 22.8%.

The selloff follows Alaska’s announcement that it will acquire rival Hawaiian Airlines in a $1.9-billion deal. It’s part of Alaska’s efforts to expand along the West Coast.

— Alex Harring, Chris Hayes

Twilio shares vacillated over the course of Monday’s trading day after annoucing plans to layoff 5% of its workforce in an effort to streamline operations.

The cuts, expected to impact about 400 employees, will mainly focus on Twilio’s Data & Applications business. The unit’s been the recent target of activist investors who have put pressure on Twilio to sell the entire company, or divest that business.

The restructuring costs are expected to range between $25 and $35 million.

Earlier this year, Twilio laid off 17% of its workforce, or about 1,500 employees.

— Rohan Goswami, Samantha Subin

Defensive sectors, which lagged this year’s market rally, outperformed on Monday. In fact, consumer staples, health care and utilities were among the best S&P 500 sectors in the session, though they remain down on the year.

Among the consumer staples outperformers were Estee Lauder shares. The cosmetics stocks gained more than 4% in midday trading, even as it’s down more than 44% in 2023. Shares of J.M. Smucker and General Mills rose more than 1%, each.

Health care stocks such as IDEXX Laboratories and Illumina also outpaced the broader market, up 5% and 3%, respectively.

— Sarah Min

Check out the companies making headlines in midday trading:

• Lululemon — Shares declined 2% after Wells Fargo downgraded the athleisure company to equal weight from overweight. The firm said Lululemon’s prior positive catalysts have already played out, and it forecasts more muted growth in 2024.
• Coinbase, MicroStrategy, Marathon Digital — Shares of Coinbase and MicroStrategy gained 6.6% and 7.5% as bitcoin advanced, passing the $41,000 mark to notch a 19-month high. Marathon Digital and Riot Platforms popped nearly 8% each.
• Spotify — Shares added 8.8% after the music streaming company announced it would lay off 17% of its workforce. The cuts amount to around 1,500 jobs, according to a source familiar. 

Read the full list here.

— Pia Singh

Bitcoin and gold have both eased from their session highs as Monday trading continues, with the yellow metal now negative on the day.

Spot gold is now down 2% to about $2,024.19 per ounce after briefly trading above $2,100 on Sunday evening in New York.

Bitcoin is now up less than 5% for the session at $41,559 after topping $42,000 earlier in the day.

— Jesse Pound

Analysts on Wall Street think Uber has more room to run once the ride sharing stock joins the benchmark S&P 500. Shares gained more than 5% on Monday as investors cheered the announcement.

“Following the inclusion, we expect UBER to lean into growth and share buybacks, which should increase investor sentiment for growth/return in 2024,” Oppenheimer analysts led by Jason Helfstein wrote. The firm maintained an outperform rating on Uber and raised its price target.

CNBC Pro subscribers can read the full story here.

— Brian Evans

Technology stocks dragged on the S&P 500 in Monday’s session.

The information technology and communication services sectors, which are both known for their tech exposure, performed the worst in the S&P 500. Each fell more than 2%.

Meanwhile, the benchmark index shed around 1%. The materials sector posted the next biggest loss at just 1% down, underscoring the impact of the drop in technology shares on the broader index.

ANSYS, Intel and Palo Alto Networks led the information technology sector lower, tumbling more than 4% a piece. With slides of nearly 3% each, Meta, Alphabet and Netflix were the worst performers in the communication services sector.

— Alex Harring

Meta Platforms‘ co-founder Mark Zuckerberg sold stocks in his tech company in November, for the first time since November 2021, according to data compiled by Insiderscore.

The tech founder dumped about 682,000 shares last month in multiple trades through a 10b5 plan, which allows insiders to sell shares under a prearranged structure. The selling came as Meta enjoyed a stellar year, with shares soaring 170% amid investor enthusiasm towards its artificial intelligence efforts.

— Yun Li

Factory orders declined slightly more than expected in October, a sign of potential deceleration for the U.S. economy heading into the end of the year.

New orders for manufactured goods fell 3.6% on the month, 0.1 percentage point more than the Dow Jones estimate and a reversal from the downwardly revised 2.3% increase in September, the Commerce Department reported Monday.

Excluding transportation, orders were off 1.2% and fell 4.2% excluding defense. Orders for longer-lasting durable goods slid 5.4%.

—Jeff Cox

Wharton professor Jeremy Siegel believes that it’s due time for the Federal Reserve to acknowledge the possibility of lowering rates come December’s meeting, he told CNBC’s “Squawk Box” on Monday morning.

He said the Fed was way too late to raise rates in the last hiking cycle, but hopes that the U.S. central bank will take more proactive measures this time around.

“That should be a part of the conversation given the softness of the data that we’ve honestly seen over the last four weeks,” he said. “They can’t be anywhere near as stubborn as they were on raising rates as they will have to be on lowering rates.”

Siegel clarified that he doesn’t believe a recession is inevitable. But cutting rates and increasing the money supply are the biggest chance for the Fed to realize the soft landing it desires, he added.

— Lisa Kailai Han

The three major indexes opened Monday’s trading session down.

The Dow fell nearly 0.5%. The S&P 500 slipped 0.8%, while the Nasdaq Composite lost around 1%,

— Alex Harring

The inverse correlation between the S&P 500‘s performance and the movement in the 10-year Treasury yield has been the strongest in more than 20 years, according to Trivariate Research founder Adam Parker. He believes the fall in the 10-year yield over the past few weeks has fueled the recent rise in equities.

“Some investors feel encouraged about the broadening of the rally and believe that is a proxy for better things to come. We are not convinced,” Parker wrote in a Monday note.

He added that lower yields have boosted small caps and value stocks in November. Both groups have previously struggled when rates pushed higher. The Russell 2000, the benchmark for small cap companies, rallied 8.8% in November and broke a 3-month losing streak. November marked the best month for the small cap index since Jan. 2023, when it rose nearly 9.7%.

“Lower yields mean those companies with poorer balance sheets have lower cost of capital, less interest expense, and a greater probability of resiliency in a downturn. It is simply about loosening financial conditions,” Parker said.

— Hakyung Kim

Check out the companies making headlines before the bell:

• Coinbase — Crypto-related assets surged after Bitcoin topped $40,000 for the first time this year. Coinbase jumped 7%, MicroStrategy gained 7% and Marathon Digital climbed 13%.
• Uber Technologies — The ride-hailing stock rose 4% after S&P Dow Jones Indices on Friday said it will enter the S&P 500, along with Jabil and Builders FirstSource. The three will replace Sealed Air, Alaska Air Group and SolarEdge Technologies. Shares of Jabil and Builders FirstSource were each higher by more than 2%.
• General Motors — Shares of the Cadillac and Chevrolet maker added 1.3% after an upgrade from Mizuho Securities, which said GM has bottomed and is poised for growth, particularly after the labor settlement with the United Auto Workers.

Read the full list here.

— Sarah Min

As investors gear up for Monday’s session, they’re looking to build on the gains seen during yet another positive trading week.

The Dow led the way last week, adding 2.4%. Meanwhile, the S&P 500 and Nasdaq Composite finished the week higher by 0.8% and 0.4%, respectively.

It marked the fifth straight winning week for each of the three major indexes. Notably, it was the first weekly win streak of that length since 2021 for the blue-chip Dow.

— Alex Harring

Stocks connected to bitcoin rallied in premarket trading as the digital currency topped $40,000.

Marathon Digital popped more than 13% before the bell, while Riot Platforms jumped more than 10%. Coinbase and MicroStrategy both advanced more than 6%.

The leg up comes as the cryptocurrency notched a 19-month high. Optimism stemmed from the potential for a bitcoin-focused exchange-traded fund and expectations that the Federal Reserve could cut interest rates.

— Alex Harring

Spotify rose more than 1% in Monday premarket trading after the music streaming platform announced it was laying off 17% of its workforce.

The latest round of cuts amounts to around 1,500 roles, a source familiar told CNBC. CEO Daniel Ek said in an email to staff that the company took on too many employees in 2020 and 2021.

Shares have surged more than 125% in 2023, regaining some ground after falling more than 25% and 66% and in 2021 and 2022, respectively.

— Alex Harring

Bitcoin topped $40,000, a new high for the year as investors get bullish ahead of possible U.S. approval bitcoin exchange-traded fund and as traders bet the Federal Reserve will begin cutting rates next year.

Bitcoin was last up by 6% to about $42,000. The cryptocurrency is now up more than 150% this year.

-John Melloy

The pan-European Stoxx 600 hovered just below the flatline in early trade, with mining stocks shedding 1.5% to lead loses while retail stocks added 0.8%.

Veteran investor David Roche said Monday he was “very worried” about the amount of global debt, but reassured that it would not be a top crisis this year as inflation continues to ebb.

There’s a mismatch in the rate at which debt is increasing and our capacity to pay for it, warned Roche.

He said he is certain that mounting debt will be a major crisis, but not the top crisis of the year as interest rates continue to fall.

“Interest rates will be on the way down rather than up and that will save us all again to fight another day,” he said on CNBC’s “Squawk Box Asia” on Monday.

Global debt increased by $10 trillion in the first half of 2023, bringing it to a record high of $307 trillion.

— Charmaine Jacob

Spot gold prices notched a new record on Monday for a second straight day, rising to a high of $2,110.8 per ounce before giving up some gains. It is currently trading at $2,084.28.

Analysts who spoke to CNBC noted that the yellow metal’s price is on course to hit fresh highs next year, citing geopolitical uncertainty, a likely weaker U.S. dollar and possible interest rate cuts.

“The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold,” said Heng Koon How, UOB’s head of markets strategy, global economics and markets research, who expects gold prices could reach up to $2,200 by the end of 2024.

Read more here.

— Lee Ying Shan

Shares of Evergrande Group rose over 9% as the beleaguered Chinese property firm’s court hearing over its possible liquidation was postponed to Jan. 29, 2024.

The firm was originally scheduled to face a Hong Kong court hearing on Monday over a petition from a creditor seeking to wind up the company.

Over the weekend, GMT Research issued a report alleging that the company had inflated its revenue for a decade, and that the it was never profitable, which Evergrande refuted.

Read the full story here.

— Lim Hui Jie

December has a long track record of posting solid gains for equities. The S&P 500 has historically posted gains 72.6% of the time, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

December has also historically been the best of any month, with an average gain of 2.97% for the up months, a 3.19% average decrease for the down months and an overall average gain of 1.28%, according to the analyst.

— Yun Li

Market pricing indicated a more than 70% chance of a rate cut starting March next year, according to the CME FedWatch Tool. Moreover, futures are pointing to cuts totaling 1.25 percentage points by the end of the year, the equivalent of five quarter percentage point reductions.

The Fed’s next meeting and last of the year is Dec. 12-13. The central bank enacted a series of 11 interest rate hikes, taking its policy rate to the highest in 22 years at a target range between 5.25%-5.5%.

— Yun Li