Market Jitters: Stocks Tumble as Yields Surge
Robust Payroll Numbers Fuel Hawkish Fed Expectations
U.S. stock index futures took a hit on Monday, plummeting as yields surged in response to last week’s impressive payroll numbers. As of 07:21 a.m. ET, Dow E-minis were down 107 points, or 0.25%, while S&P 500 E-minis fell 45.25 points, or 0.77%. Nasdaq 100 E-minis suffered the largest decline, dropping 243.25 points, or 1.16%. The Russell 2000 index, which tracks domestically focused companies, plummeted 1.1% to its lowest level since September 2024.
Fear Gauge Hits Three-Week High
Wall Street’s main indexes logged their second consecutive week of declines on Friday, driven by better-than-expected reports on employment and services activity. These reports raised concerns that inflation could be running high in the world’s largest economy. The incoming Donald Trump administration’s policies, including tariffs and a clampdown on illegal immigration, are also expected to threaten global trade and fuel price pressures.
Yields Pinched at Multi-Month Highs
After an initial spike, yields on longer-dated Treasury bonds are stuck at multi-month highs. Interest-rate futures now reflect just 26 basis points worth of cuts by December this year, according to data compiled by LSEG. This shift in yields is largely attributed to the robust labor market and recent pickup in inflation, making it difficult for the Federal Reserve to justify further rate cuts.
Fed Policy Outlook in Focus
The Consumer Price Index figure and the central bank’s Beige Book on economic activity, both due on Wednesday, will provide valuable insights into the central bank’s policy outlook. Investors are eagerly awaiting these reports to gauge the Fed’s stance on interest rates.
Megacaps Take a Hit
The risk-off stance has taken a toll on megacaps, which have led the rally in U.S. stocks over the last two years. Tesla slid 2.9%, while Alphabet lost 0.6% in premarket trading. Chip stocks such as Nvidia, Advanced Micro Devices, and Broadcom also suffered significant losses after the U.S. government announced further restrictions on artificial-intelligence chip and technology exports.
Earnings Season Kicks Off
Major lenders JPMorgan Chase & Co, Wells Fargo, Goldman Sachs, and Citigroup are set to report earnings on Wednesday, providing a glimpse into the health of the financial sector. Meanwhile, Moderna’s stock plummeted 17% after cutting its 2025 sales forecast by $1 billion, citing a slow launch of its respiratory syncytial virus shot and weak demand for COVID-19 vaccines.
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