Market Turmoil: Stocks Plummet as Bond Yields Soar
Inflation Fears Grip Investors
The stock market took a drastic hit on Tuesday as a surge in bond yields sparked concerns about inflation and interest rates. The S&P 500 plummeted over 1%, while the Nasdaq 100 fell nearly twice as much. The Dow Jones Industrial Average also slid, losing 0.4% of its value.
Tech Stocks Take a Beating
Big tech companies were among the hardest hit, with Nvidia Corp. sinking 6.2%. The “Magnificent Seven” megacaps, a gauge of the largest tech companies, fell 2.5%. The Russell 2000 index of smaller firms dropped 0.7%.
Bond Yields Reach New Heights
Treasury yields climbed across the curve, with a $39 billion sale of 10-year bonds drawing the highest yield since 2007. The yield on 10-year Treasuries jumped six basis points to 4.69%. In the UK, 30-year yields hit the highest level since 1998, raising the prospect of tax increases to meet fiscal rules.
Fed Rate Cuts in Doubt
The market’s anxiety was fueled by speculation that the Federal Reserve may not cut interest rates before July due to inflation risks. Fed Bank of Atlanta President Raphael Bostic cautioned that officials should be cautious given uneven progress on lowering inflation. Bill Adams at Comerica Bank predicted that the Fed will likely switch from cutting interest rates at every decision to pausing in between rate cuts in 2025.
Job Openings Rise, But Inflation Concerns Persist
Separate data showed job openings rose to a six-month high in November, boosted by a jump in business services. However, other industries showed more mixed demand for workers. Despite the positive jobs data, inflation concerns continued to weigh on the market.
Cryptocurrencies Take a Hit
Bitcoin dropped below $100,000, while Ether fell 7.6% to $3,390.43.
Expert Insights
Kenny Polcari at SlateStone Wealth noted that rising yields are not necessarily an issue for stocks unless the economy starts to fail. Mark Streiber at FHN Financial said the latest US services report supports the Fed’s recent communication that rate cuts would likely slow in 2025 due to upside price risks. Lauren Goodwin at New York Life Investments emphasized that growth expectations are sanguine, but investors should be cautious about inflation and interest rates.
Corporate Highlights
In corporate news, Meta Platforms Inc. will end third-party fact checking on its social media platforms in the US, while Uber Technologies Inc. is teaming up with Nvidia to accelerate the development of autonomous driving technology. Johnson & Johnson said its combination therapy for lung cancer outperformed AstraZeneca Plc’s blockbuster Tagrisso in a head-to-head study.
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