Market Update: Stocks Edge Lower Amid Rising Bond Yields and Crude Prices
The S&P 500 Index ($SPX) (SPY) is down -0.35%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.49%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.75%. March E-mini S&P futures (ESH25) are down -0.42%, while March E-mini Nasdaq futures (NQH25) drop -0.93%.
Following Friday’s sharp declines, stocks continued their downward trend today. The S&P 500 hit a 2-1/4 month low, and the Nasdaq 100 reached a 1-1/2 month low. These losses stem from rising bond yields after a stronger-than-expected U.S. December payroll report reduced the likelihood of further rate cuts by the Federal Reserve (Fed). This has pushed the U.S. 10-year Treasury yield to a 14-month high, while the 10-year German bund yield climbed to a 6-1/4 month high.
Crude oil prices are also rising, contributing to inflation worries and adding stress to both stocks and bonds. Today, the price of WTI crude oil increased more than +2%, reaching a 5-month high. This surge follows new U.S. sanctions on Russian crude, which threaten to tighten global oil supplies.
On a more positive note, health insurance stocks, particularly those with Medicare Advantage plans, are showing strength. A newly proposed Medicare plan may allow these companies to receive increased payments starting in 2026. Additionally, the rise in crude prices is benefiting energy stocks. Chinese trade data also provided a favorable outlook, with December exports growing +10.7% year-over-year, surpassing the +7.5% expectation, and imports unexpectedly increasing by +1.0% year-over-year, compared to an anticipated decline of -1.0%.
Investors now await Wednesday’s U.S. consumer price report, which could determine if persistent price pressures will discourage the Fed from cutting interest rates. Analysts expect December’s Consumer Price Index (CPI) to rise to +2.9% year-over-year from +2.7% in November, while core CPI is anticipated to remain steady at +3.3% year-over-year. Thursday’s report on U.S. retail sales will also be closely watched, with a +0.6% month-over-month increase predicted for December.
Currently, the market is pricing in only a 3% chance of a -25 basis point rate cut at the upcoming FOMC meeting on January 28-29.
Internationally, stock markets are mostly lower today. The Euro Stoxx 50 fell -0.38%. China’s Shanghai Composite Index dropped to a 3-1/2 month low, closing down -0.25%. Meanwhile, Japan’s Nikkei Stock 225 was closed in observance of Coming-of-Age Day.
Interest Rates
March 10-year T-notes (ZNH25) are down -2 ticks, with the 10-year T-note yield climbing +2.1 basis points to 4.778%. Today, T-note prices fell to an 8-1/2 month low as bond markets reacted to Friday’s strong U.S. payrolls data and heightened inflation expectations from rising oil prices. Additionally, the anticipated issuance of $40 billion to $45 billion in corporate debt this week is causing dealers to short 10-year T-note futures as a hedge against increased supply.
European bond yields are also rising, with the 10-year German bund yield reaching a 6-1/4 month high of 2.634% before settling up +1.0 basis point at 2.605%. The 10-year UK gilt yield increased by +2.0 basis points to 4.858%.
Comments from ECB Governing Council member Rehn indicated that further rate cuts may be on the table, as disinflation appears to be proceeding amidst a weakening growth outlook. Market participants anticipate a 93% chance of a -25 basis point rate cut by the ECB during its meeting on January 30.
US Stock Movers
Tech giants are dragging down the broader market, with Nvidia (NVDA) leading declines in the Dow Jones Industrials, falling more than -2%. Meta Platforms (META) and Apple (AAPL) both dropped over -2%, while Tesla (TSLA) and Alphabet (GOOGL) decreased more than -1%. Amazon.com (AMZN) fell slightly by -0.15%.
Moderna (MRNA) suffered a significant loss of over -21% after it revised its 2025 revenue estimate to $1.5 billion-$2.5 billion from a previous estimate of $2.5 billion-$3.5 billion, citing weaker demand for its Covid and RSV vaccines.
Californian utility companies are feeling the heat from potential liability related to Southern California wildfires, with Edison International (EIX) down over -10% and PG&E Corp (PCG) down more than -4%. Sempra (SRE) also fell more than -1%.
iRobot Corp (IRBT) dropped over -16% after reporting a preliminary Q4 revenue of $171 million, which missed expectations of $188 million. Abercrombie & Fitch (ANF) projected Q4 sales growth of only 7% to 8%, below the consensus of 9.1%, leading to a decline of over -17%. Meanwhile, Inspire Medical Systems (INSP) fell more than -8% after providing a full-year revenue forecast below expectations.
Amer Sports (AS) is down more than -5% following weaker-than-anticipated revenue growth projections for 2024. Macy’s (M) also declined over -5% after suggesting that Q4 net sales may fall slightly short of its previous forecast of $7.8 billion-$8 billion.
On a brighter note, health insurers with Medicare Advantage plans are rallying after Medicare proposed changes that could increase their 2026 payments. Humana (HUM) rose more than +6% to lead S&P 500 gainers, while CVS Health (CVS) was up over +5%. UnitedHealth Group (UNH) also advanced more than +4% in the Dow.
Energy stocks are thriving alongside rising WTI crude oil prices, with Valero Energy (VLO) and Marathon Petroleum (MPC) gaining more than +5%, and APA Corp (APA) climbing over +4%. Other notable gainers include Haliburton (HAL) and Schlumberger (SLB), which both rose more than +3%.
Notably, US Steel (X) surged over +8% after reports surfaced that Cleveland-Cliffs and Nucor are considering a takeover bid for the company.
CF Industries Holdings (CF) increased by more than +6% after receiving a double-upgrade from Piper Sandler, with a new price target of $105. Intra-Cellular Therapies Inc (ITCI) leaped over +34% following Johnson & Johnson’s agreement to acquire the company for approximately $14.6 billion. Crown Holdings (CCK) rose over +2%, aided by Morgan Stanley’s upgrade to overweight with a price target of $105. Discover Financial Services (DFS) moved up more than +1% after receiving an upgrade from UBS to buy.
Earnings Reports (1/13/2025)
Reports are expected from Aehr Test Systems (AEHR), BARK Inc (BARK), Dakota Gold Corp (DC), Immersion Corp (IMMR), KB Home (KBH), and Unity Bancorp Inc (UNTY).
On the date of publication, Rich Asplund did not hold any positions in the securities mentioned in this article. All information and data presented here are for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
