In a turbulent session on Wednesday, US stocks experienced a slide, driven by a surge in bond yields and diminishing optimism regarding swift interest-rate cuts. The market’s mood was further dampened as investors awaited crucial job data and the imminent release of Federal Reserve meeting minutes.
The Dow Jones Industrial Average (^DJI) suffered a 0.3% decline, mirroring the trend, as the benchmark S&P 500 (^GSPC) slipped by approximately 0.5%. The Nasdaq Composite (^IXIC) bore the brunt of the downturn, registering a 0.7% drop in a session that witnessed technology stocks shedding almost 1.6%.
Hopes for a continuation of the year-end market rally into 2024 were dealt a blow on Tuesday, as both stock indexes and bond prices simultaneously plummeted, marking the worst start to a new year in decades. The downward spiral persisted as bonds faced a fourth consecutive day of declines, propelling the 10-year Treasury yield (^TNX) to hover near 4%.
Investors, initially optimistic about a swift course of interest-rate cuts, began to retract their bets, with the CME FedWatch Tool indicating a notable shift. Presently, 74% of traders are pricing in a potential Fed pivot in March, a stark contrast to the 89% consensus recorded just a week ago.
Anticipation surrounds the release of the Federal Reserve’s December meeting minutes, scheduled for later. Market observers are eager to gain insights into officials’ perspectives on the likelihood of easing up on tightening measures, aiming for a “soft landing” to ensure economic stability.
As the market awaits the Federal Reserve’s cues, attention is also directed towards the Job Openings and Labor Turnover Survey (JOLTS) report. Analysts are particularly interested in this report, given the unexpected resilience of the labor market, which has contributed to growing expectations of a potential shift in the Federal Reserve’s stance. The data released on Wednesday is poised to set the stage for the eagerly anticipated December US monthly jobs report, scheduled for release on Friday.
In conclusion, the intricate dance between stocks and bond yields continues to shape market dynamics, with the recent surge in bond yields exerting downward pressure on stocks and fostering an environment of heightened uncertainty among investors. Investors and analysts alike will closely scrutinize these economic indicators for any signs of the direction the Federal Reserve may take in the coming months.
Source: Yahoo Finance
