In a tumultuous start to the trading session on Wednesday, stocks markets experience a slip in US stocks, reflecting a surge in bond yields and a diminishing optimism regarding rapid interest-rate cuts. Investors braced themselves for fresh job data and the imminent release of the Federal Reserve meeting minutes.
The Dow Jones Industrial Average (^DJI) bore the brunt, witnessing a 0.3% decline, while the benchmark S&P 500 (^GSPC) followed suit with a 0.5% slip. The tech-heavy Nasdaq Composite (^IXIC) experienced a more pronounced drop of approximately 0.7%, as the technology sector grappled with losses amounting to almost 1.6%.
Earlier hopes of the year-end market rally extending into 2024 suffered a setback on Tuesday, as both stock indexes and bond prices tumbled simultaneously, marking one of the most challenging starts to a year in decades. Bond prices continued their downward trajectory for the fourth consecutive day, propelling the 10-year Treasury yield (^TNX) to nearly 4%.
Traders, anticipating a shift in Federal Reserve policy, have scaled back their bets on imminent interest-rate cuts. According to the CME FedWatch Tool, 74% of traders are now pricing in a potential March pivot, marking a significant decrease from the 89% consensus observed just a week ago.
Market participants are eagerly awaiting the release of the minutes from the Federal Reserve’s December meeting, scheduled for later today. Analysts believe that these minutes could offer valuable insights into officials’ perspectives on the timing of a potential relaxation of tightening measures, aiming for a “soft landing” for the economy.
Attention is also focused on the Job Openings and Labor Turnover Survey (JOLTS) report, as the unexpected resilience of the labor market has played a pivotal role in shaping expectations for a Federal Reserve policy shift. The data released on Wednesday is expected to influence expectations for the eagerly awaited December U.S. monthly jobs report, scheduled for release on Friday.
In summary, the recent slip in US stocks reflects a delicate market sentiment, influenced by factors such as rising bond yields and diminishing expectations for swift interest-rate cuts, underscoring the challenges and uncertainties currently facing investors. Investors and analysts alike are keenly monitoring these developments to gain a comprehensive understanding of the economic landscape and potential shifts in monetary policy.
Source: Yahoo Finance
