Stocks Fall as Bond Yields Rise on Waning Fed Bets: Markets Wrap

Posted byadmin Posted onJanuary 7, 2025 Comments0
Stocks Fall as Bond Yields Rise on Waning Fed Bets: Markets Wrap

(Bloomberg) — Stocks fell and bond yields rose after the latest economic data spurred bets the Federal Reserve won’t cut interest rates again before July amid inflation pressures.

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Equities lost traction after a two-day advance as a report on US service providers showed a price measure hitting the highest since early 2023. The market also got hit amid a selloff in big tech. Nvidia Corp. sank 4% after a surge that drove the chipmaker to all-time highs. Treasuries dropped across the curve, while a $39 billion sale of 10-year bonds drew its highest yield since 2007.

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“Rising yields are not necessarily an issue for stocks unless, of course, the economy starts to fail. Then all bets are off,” said Kenny Polcari at SlateStone Wealth. “But rising yields will be an issue if inflation rears its ugly head.”

To Mark Streiber at FHN Financial, the latest US services report supports the Fed’s recent communication that rate cuts would likely slow in 2025 due to upside price risks. Fed Bank of Atlanta President Raphael Bostic said officials should be cautious given uneven progress on lowering inflation.

“The Fed will likely switch from cutting interest rates at every decision, as they did between September and December, to pausing in between rate cuts in 2025,” said Bill Adams at Comerica Bank.

Separate data Tuesday showed job openings rose to a six-month high in November, boosted by a jump in business services — while other industries showed more mixed demand for workers.

The S&P 500 fell 0.5%. The Nasdaq 100 slid 1.1%. The Dow Jones Industrial Average wavered. A gauge of the “Magnificent Seven” megacaps sank 1.8%. The Russell 2000 index of smaller firms dropped 0.5%.

The yield on 10-year Treasuries climbed four basis points to 4.67%. The market also came under pressure amid a raft of investment-grade deals. In the UK, 30-year yields hit the highest since 1998, raising the prospect of tax increases to meet fiscal rules.

With Treasury yields climbing again, Bank of America Corp. strategists predict traders could return to perceiving strong economic data as negative, as it signals the Fed will need to keep rates elevated for longer.

Growth scare is subsiding as inflation and rates become a bigger focus, the team led by Ohsung Kwon said Tuesday.

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