Markets Slide as Investors Digest Job Data and Rising Bond Yields
The S&P 500 Index ($SPX) (SPY) has dipped by -0.15%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.10%, and the Nasdaq 100 Index ($IUXX) (QQQ) has fallen -0.20%. Additionally, March E-mini S&P futures (ESH25) decreased by -0.16%, while March E-mini Nasdaq futures (NQH25) dropped by -0.15%.
Market Overview
Trading pressure is evident today as markets reopen after the Christmas holiday in the US. Major exchanges in Europe and the UK are still closed for the Christmas and Boxing Day festivities. The overall market is feeling the weight of higher bond yields, which are rising due to increased supply as the Treasury plans to auction $44 billion of 7-year Treasury notes later today. This comes after the 10-year Treasury note yield reached a 7-month peak of 4.639%, coinciding with a notable drop in weekly initial unemployment claims, which fell to a 1-month low.
Asian Markets Influencing US Stocks
Despite these declines, Asian equity markets showed some strength. Chinese stocks recorded slight increases on expectations of further economic stimulus, with reports suggesting China may issue a record 3 trillion yuan ($411 billion) of special Treasury bonds in 2025. Meanwhile, Japan’s Nikkei Stock Index rose to its highest level in a week, driven by a weaker yen against the dollar, especially after Bank of Japan Governor Ueda refrained from hinting at a potential interest rate hike earlier this week.
Job Market Data Mixed
Recent job market news from the US presented a mixed picture. Weekly initial unemployment claims unexpectedly declined by 1,000 to a one-month low of 219,000, indicating a stronger labor market than the anticipated rise to 223,000. Conversely, continuing unemployment claims saw an increase of 46,000 to a 3-year high of 1.91 million, suggesting that job seekers are facing longer durations of unemployment.
Market Predictions
Current market evaluations suggest a 9% chance of a -25 basis point rate cut during the upcoming January 28-29 FOMC meeting.
International Market Performance
Internationally, stock markets have generally performed better today. The Euro Stoxx 50 was closed for the holiday, while China’s Shanghai Composite Index inched up by +0.14%. Japan’s Nikkei Stock 225 saw a rise, closing up by +1.12%.
Interest Rate Developments
In the US, March 10-year Treasury notes (ZNH25) are currently down by 9 ticks, with the 10-year T-note yield climbing +2.2 basis points to 4.611%. T-note prices are feeling the pressure from supply and expectations of economic growth, especially after jobless claims fell unexpectedly. The 10-year breakeven inflation expectations rate also rose to a 1-month high of 2.366%, further impacting T-note performance.
European Bonds Update
European government bond markets remain closed for the Christmas and Boxing Day holidays.
Swaps currently suggest a 100% probability of a -25 basis point rate cut by the ECB in their January 30 policy meeting, with an 8% chance of a more drastic -50 basis point cut.
US Stocks in Focus
Several stocks linked to cryptocurrencies are facing pressure following a -3% drop in Bitcoin’s price (^BTCUSD). Consequently, Microstrategy (MSTR) is down over -3%, marking it as one of the largest losers in the Nasdaq 100. Other affected companies include Mara Holdings (MARA) and Riot Platforms (RIOT), each falling more than -2%. Additionally, Coinbase Global (COIN) has also seen a similar decrease.
Homebuilding stocks are similarly struggling due to rising 10-year T-note yields, which dampen housing demand. Builders FirstSource (BLDR) is down more than -1%, while Invitation Homes (INVH) has fallen by -0.67%. Home Depot (HD) has experienced a nearly -0.74% decline, leading losses among the Dow Jones industrials.
Hagerty Inc (HGTY) is down more than -2% after Raymond James lowered its rating on the stock from market perform to underperform. Brookline Bancorp (BRKL) has dropped close to -1%, following a downgrade from Keefe, Bruyette & Woods to market perform from outperform.
On a positive note, Avita Medical (RCEL) has surged more than +4%, building on a +9% increase from Tuesday after D. Boral Capital LLC initiated coverage with a buy recommendation and a $25 price target. UnitedHealth Group (UNH) is up nearly +1% since Raymond James added it to its Favorites List, citing its historically attractive valuation. Apple (AAPL) increased by +0.14% after Wedbush raised its target price on the stock from $300 to $325. In addition, Palvella Therapeutics (PVLA) is up more than +1%, after HC Wainwright & Co LLC gave it a buy recommendation with a target price of $38.
Earnings Reports
Alumis Inc (ALMS) is scheduled to report earnings today (12/26/2024).
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.
