US Stocks Hit on Inflation Fears – Nasdaq Down 1.9%
Major US stock indices took a hit yesterday as data raised inflationary concerns for the coming year. Job openings increased in November, and service activity rose, prompting the market to price in the first rate cut of 2025 for July. The Dow fell 0.42%, while the tech-heavy S&P 500 and Nasdaq dropped 1.11% and 1.89%, respectively. The dollar regained some recent losses, with the DXY up 0.32% to 108.69. US Treasury yields also climbed, reaching levels not seen since last April. The 2-year yield rose 1.5 basis points to 4.289%, and the benchmark 10-year yield increased 5.5 basis points to 4.685%. Oil prices moved higher due to ongoing supply concerns, with Brent up 1.05% to $77.10 and WTI rising 1.06% to $74.34 per barrel. Gold continued its upward momentum, gaining 0.45% in volatile trading to close at $2,647.80.
Inflation in Focus Early in the Year
Traders fear that the first salvo of US inflation concerns for the year has hit the markets. Data showed that the US economy remains robust, with job openings rising and services PMI numbers exceeding expectations. Markets have been pricing in inflationary risks since the Republican election victory in November, and expectations continue to build, amplified by statements from President-elect Donald Trump. With these concerns now supported by stronger data, trends from late 2024—such as higher Treasury yields and dollar appreciation—may gain further momentum in the coming weeks and months.
Another Busy Trading Day Ahead
The new trading year is gaining pace, with markets back to full liquidity and the macroeconomic calendar active once more. The Asian session begins today with Australia’s first tier-1 data release of the year: CPI data, where markets anticipate a 2.2% year-on-year increase. In the European session, there’s little on the agenda, but the US session features two key labor market updates. The ADP Non-Farm Employment Change and weekly unemployment claims data will be released within 15 minutes of each other, and stronger-than-expected prints could drive further dollar strength. Later, the release of the FOMC’s December meeting minutes near the end of the trading day is expected to add additional volatility to the market.
