U.S. Markets Close Mixed Amid Rising Bond Yields and Crude Oil Prices
The S&P 500 Index ($SPX) (SPY) closed up +0.16% on Monday, the Dow Jones Industrials Index ($DOWI) (DIA) increased by +0.86%, while the Nasdaq 100 Index ($IUXX) (QQQ) fell -0.30%. March E-mini S&P futures (ESH25) saw a rise of +0.26%, but March E-mini Nasdaq futures (NQH25) dipped by -0.15%.
On Monday, stocks rebounded from early declines, but the Nasdaq 100 reached a 1.5-month low. Global stock markets faced pressure due to rising bond yields, following last Friday’s stronger-than-anticipated U.S. payroll report that increased uncertainty about potential Federal Reserve rate cuts. The yield on the U.S. 10-year Treasury note climbed to its highest level in 14 months, while Germany’s 10-year bund yield also hit a 6.25-month high.
Inflation Concerns Sparked by Rising Oil Prices
The rise in crude oil prices has reignited inflation worries, contributing to the downward pressure on both stocks and bonds. On Monday, WTI crude oil prices rose over +2% to reach a new five-month high, as fresh U.S. sanctions against Russian crude are likely to tighten global supplies.
Despite these challenges, stock indexes recovered from their initial losses. The S&P 500 and Dow Jones benefited from positive movement in health insurance stocks following a proposed plan by Medicare that may increase payments for certain companies in 2026. Additionally, rising crude prices boosted energy stocks, while encouraging trade data from China added a positive note, as December exports rose +10.7% year-on-year, outpacing the expected +7.5% and imports unexpectedly rose +1.0% year-on-year against a -1.0% forecast.
Upcoming Economic Reports in Focus
Investors are eagerly anticipating Wednesday’s U.S. consumer price index (CPI) report, which may influence the Fed’s interest rate decisions. Analysts expect December’s CPI to rise to +2.9% year-on-year from +2.7% in November, while core CPI is anticipated to remain steady at +3.3%. Additionally, a retail sales report due on Thursday will shed light on consumer spending, with expectations for December retail sales to rise by +0.6% month-on-month.
This week marks the start of earnings season, with major banks set to report fourth-quarter results, including Citigroup, JPMorgan Chase, Goldman Sachs, and Wells Fargo on Wednesday. Bloomberg Intelligence forecasts S&P 500 earnings to grow by +7.5% in Q4, making it the second-highest pre-season projection in three years.
The markets currently see a 3% chance of a -25 basis point rate cut at the upcoming FOMC meeting on January 28-29.
International Markets Shift Lower
Elsewhere, overseas stock markets ended the day lower. The Euro Stoxx 50 fell by -0.46%. China’s Shanghai Composite Index dropped to a three-and-a-half month low, finishing down -0.25%, while Japan’s Nikkei Stock 225 was closed for the Coming-of-Age Day holiday.
Interest Rates Update
March 10-year Treasury notes (ZNH25) closed down -5 ticks on Monday, with the 10-year T-note yield rising by +3.1 basis points to 4.790%. T-note prices faced downward pressure, reflecting the significant implications of Friday’s robust payroll report on Fed rate expectations, coupled with increasing inflation forecasts driven by surging oil prices. The anticipated supply of $40 billion to $45 billion in corporate debt this week has also weighed on T-notes.
In Europe, government bond yields climbed higher. The yield on Germany’s 10-year bund reached a six-and-a-half month high of 2.634%, closing up +1.8 basis points at 2.613%. The UK 10-year gilt yield rose by +4.7 basis points to 4.885%. ECB Governing Council member Rehn indicated that ongoing rate cuts by the ECB could be prudent due to a weakening growth outlook.
Market swaps are anticipating a 95% probability of a -25 basis point rate cut by the ECB during its policy meeting on January 30.
Notable U.S. Stock Movements
Health insurance stocks surged on Monday after Medicare’s announcement regarding potential 2026 payment increases. As a result, shares of CVS Health (CVS) rose by over +7%, while Humana (HUM) gained more than +6%. Elevance Health (ELV) and UnitedHealth Group (UNH) also reported gains of +4% and +3%, respectively.
The energy sector enjoyed upward movement with the rise in WTI crude oil prices. Notably, Valero Energy (VLO) closed up more than +4%, and Baker Hughes (BKR) rose by over +3%. Other winners in the sector included Marathon Petroleum (MPC) and Haliburton (HAL), which both reported gains of over +3%.
Mosaic (MOS) topped the S&P 500 with a +8% increase after Piper Sandler upgraded its stock rating. Meanwhile, U.S. Steel (X) climbed over +6% following reports that Cleveland-Cliffs and Nucor are considering a potential takeover.
Intra-Cellular Therapies Inc (ITCI) saw a remarkable gain of +34% after announcing an agreement with Johnson & Johnson for an acquisition worth approximately $14.6 billion.
However, technology giants faced losses. Nvidia (NVDA) dropped nearly -2%, leading the Dow’s decliners. Other significant losses included Meta Platforms (META) and Apple (AAPL), both down more than -1%.
Moderna (MRNA) led S&P 500 losers, falling over -16% after revising its 2025 revenue forecast downward due to weakening demand for its vaccines.
Utility Stocks Under Pressure
Utility stocks in California continued their decline amid concerns about liability from Southern California wildfires. Edison International (EIX) dropped over -11%, while PG&E Corp (PCG) fell more than -5%.
iRobot Corp (IRBT) experienced a steep decline of over -22% after its preliminary Q4 revenue fell short of expectations.
Additionally, Abercrombie & Fitch (ANF) and Inspire Medical Systems (INSP) both posted significant losses following disappointing sales forecasts. Macy’s (M) also faced challenges, lowering its Q4 sales expectations to below previous estimates.
Earnings Reports on the Horizon
On January 14, 2025, companies such as Applied Digital Corp (APLD), Calavo Growers Inc (CVGW), Gencor Industries Inc (GENC), Park Aerospace Corp (PKE), and Renovaro Inc (RENB) are scheduled to report earnings.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
