Markets Tumble Amid Rising Bond Yields and Labor Market Strength
Stocks Slide to Two-Month Lows
The S&P 500 Index ($SPX) (SPY) is down -1.58%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.52%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.82%. March E-mini S&P futures (ESH25) have dropped -1.64%, while March E-mini Nasdaq futures (NQH25) are down -1.98%.
Labor Market Data Surprises Investors
Today’s stock market sell-off was fueled by unexpected robustness in the US labor market, raising concerns about potential interest rate pauses from the Federal Reserve. In December, nonfarm payrolls increased by +256,000—well above the forecast of +165,000 and marking the highest growth in nine months. Additionally, the unemployment rate decreased unexpectedly from 4.2% to 4.1%. Although average hourly earnings only rose by +3.9% year-over-year, which is less than the expected +4.0%, the labor strength is notable.
Chip Stocks Under Pressure
The tech sector, particularly chip stocks, is weighing heavily on market indices. Bloomberg reported on plans from the Biden administration to limit sales of AI chips used in data centers, which impacted companies significantly. For instance, Nvidia (NVDA) dropped over -3%, while Applied Materials (AMAT) and ARM Holdings Plc (ARM) also faced declines of more than -3%.
Consumer Sentiment Drops
A report from the University of Michigan indicated that US consumer sentiment fell more than expected in January. The consumer sentiment index dropped from 74.0 to 73.2, while inflation expectations increased—both for the one-year and the five-to-ten year ranges—hovering at their highest levels in several years. These factors have further strained market sentiment.
Federal Reserve Remains Cautious
Bearish remarks from Federal Reserve officials following the market closure last Thursday have contributed to the downturn. Fed Governor Bowman indicated that inflation progress has stalled, suggesting the need to proceed cautiously with policy adjustments. Similarly, the comments from President Collins noted unexpected uncertainty regarding the economic outlook, which has led to diminished forecasts for interest rate cuts.
International Markets Reflect US Trends
Global markets mirrored the US declines, with the Euro Stoxx 50 down -0.40%. In Asia, China’s Shanghai Composite Index fell to a 2-1/2 month low, closing down -1.33%. Japan’s Nikkei Stock 225 saw a decline to a two-week low, closing down -1.05%.
Bond Yields Rise
March 10-year T-notes (ZNH25) are down -17 ticks, with yields increasing to 4.741%. T-note prices fell due to the stronger-than-expected jobs report and hawkish Fed comments. European government bond yields have also risen, with the 10-year German bund yield reaching a six-month high of 2.624%.
Stock Highlights
Multiple US stocks are experiencing significant movements today. Constellation Brands (STZ) is down over -13% following disappointing sales results. Similarly, ON Semiconductor (ON) has declined more than -7% due to a downgrade from Truist. Meanwhile, Walgreens Boots Alliance (WBA) surged over +24% on strong quarterly sales, leading the S&P 500 gainers.
Stock movements are also noted in the airline sector, with Delta Air Lines (DAL) up more than +9% after reporting better-than-expected earnings. Other airlines, including United Airlines (UAL) and American Airlines Group (AAL), also saw increases.
In contrast, Californian utility stocks are being pressured due to wildfire-related concerns, with PG&E Corp (PCG) down over -9%.
Earnings Reports (1/10/2025)
Businesses reporting earnings include Constellation Brands Inc (STZ), Delta Air Lines Inc (DAL), TD SYNNEX Corp (SNX), and Walgreens Boots Alliance Inc (WBA).
On the date of publication, Rich Asplund did not have any positions in the securities mentioned in this article. All information provided is solely for informational purposes. For more details, 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.
