Market Volatility: Stocks Plunge as Inflation Concerns Resurface
US stocks took a sharp downturn on Tuesday, with the S&P 500 and Nasdaq Composite indices falling over 1% and 1.9%, respectively. The Dow Jones Industrial Average also dropped, albeit by a smaller margin of 0.4%. The market sell-off was triggered by a mix of economic data that hinted at rising inflation and a potential slowdown in the labor market.
Inflation Fears Resurface
The Institute for Supply Management’s manufacturing PMI indicated that the manufacturing sector continued to expand last month, but the prices paid index jumped to a nearly two-year high of 64.4, up from 58.2 in November. This surge in prices has raised concerns that the Federal Reserve’s fight against inflation is far from over.
Labor Market Shows Signs of Cooling
The Job Openings and Labor Turnover Survey (JOLTS) revealed that job openings rose more than expected in November, but other signs of cooling in the labor market persisted. Fewer Americans left their jobs, and hiring continued to slow. The quits rate, a sign of confidence among workers, fell to 1.9% from 2.1% in October.
Nvidia Shares Plummet
Nvidia shares reversed gains to fall over 6% after hitting a record close just one day prior. The chip maker was the Dow’s worst performer of the session. Despite CEO Jensen Huang’s keynote at the CES trade show, which showcased new AI products, investors seemed unimpressed.
Treasury Yields Rise
The 10-year Treasury yield added roughly 7 basis points to hover just below 4.7%. Bets on when the Federal Reserve will next cut interest rates were pushed back, with traders now seeing a less than 50% chance of a rate cut before the central bank’s June meeting.
Other Market Movers
Meta shares fell nearly 2% after CEO Mark Zuckerberg announced an end to the company’s third-party fact-checking program. Palantir Technologies shares dropped more than 6% after Morgan Stanley reinstated coverage of the company with an Underweight rating. Bitcoin fell below the critical $100,000 mark, echoing broader market losses.
Economic Data Ahead
Investors are now bracing for Friday’s all-important December jobs report, which will provide further insight into the labor market’s trajectory. The data will be closely watched, as it could influence the Federal Reserve’s decision on interest rates in the coming months.
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