Robert J. Williams 
The stock market experienced a downturn on Tuesday as positive economic indicators once again proved detrimental to Wall Street. Better-than-expected reports on the job market and business activity triggered a fall, with the S&P 500 losing 1.1%, the Dow Jones Industrial Average losing 0.4%, and the Nasdaq Composite dropping 1.9%.
Stocks were weighed down by rising yields in the bond market, which surged following the release of promising economic data. Reports showed U.S. employers posting more job openings in November than anticipated, and business activity for finance, retail, and other sectors outpaced expectations in December.
While these reports are encouraging for job seekers and those fearing an economic slowdown, they also raise concerns about inflation persistence, reducing the likelihood of the Federal Reserve cutting interest rates—moves typically favored by Wall Street. Although the Fed began lowering interest rates in September to stimulate growth, it has hinted at a possible slowdown in rate easing. President-elect Donald Trump’s tariff threats have added to the inflation concerns, above the Fed’s 2% target.
The Institute for Supply Management’s report on U.S. services highlighted accelerating price increases in December, adding to inflation anxiety. This, combined with fewer expected interest rate cuts in 2025, prompted longer-term Treasury yields to climb. Concerns about Trump’s potential policies, such as tax cuts that could increase national debt, have further exacerbated the rise in yields.
Higher treasury yields make bonds more appealing than stocks, putting downward pressure on stock prices. The super-safe bonds are offering notably higher returns. The 10-year Treasury yield increased to 4.69% from 4.63% earlier in the day and from 4.15% in early December.
Rising yields particularly impact stocks considered overvalued, spotlighting companies like Nvidia, which have surged due to enthusiasm around artificial intelligence. Nvidia, which had been poised to set a new record high, saw its stock price fall by 6.2% after CEO Jensen Huang highlighted new AI initiatives and partnerships.
Nvidia’s losses were a significant drag on the S&P 500, with additional downward pressure from tech giants such as Amazon, Tesla, Apple, and Microsoft. As concerns over a slowing U.S. economy ease and the 10-year Treasury yield stabilizes above 4.50%, the market environment appears to shift back to a “good news is bad news” scenario, as noted by Bank of America strategists. This raises the stakes for Friday’s job market update, expected to show slowed hiring with an anticipated 156,500 job increase in December, according to FactSet.
A job growth range of 125,000 to 175,000, with an unemployment rate of 4.2%, is considered optimal for U.S. stock markets, signaling stability for the Federal Reserve.
Among the day’s few bright spots was Cintas, whose stock rose 2% after announcing a $275 per share cash offer to acquire UniFirst. Despite Cintas’ attempts to engage UniFirst’s board since November, it remains unsuccessful in initiating discussions. UniFirst stocks responded by surging 20.9% to $204.69, still below Cintas’ proposed price.
Further developments include the merger between Shutterstock and Getty Images, creating a $3.7 billion visual content company, which lifted share prices by 24.1% and 14.8%, respectively.
In summary, the S&P 500 experienced a decline of 66.35 points, closing at 5,909.03. The Dow Jones Industrial Average decreased by 178.20 points to 42,528.36, and the Nasdaq Composite dropped by 375.30 points to 19,489.68.
Globally, certain Chinese stocks fell after the U.S. Defense Department blacklisted companies with alleged ties to China’s military. This affected prominent firms, including Tencent, AI giant SenseTime, and battery leader CATL. The repercussions caused Tencent’s Hong Kong-traded stock to drop 7.3%, contributing to a 1.2% fall in the Hang Seng index, though other Asian and European markets showed resilience.
The interplay between economic strength and Wall Street’s response highlights ongoing challenges for investors navigating a complex landscape. Rising treasury yields and tech stock corrections continue to influence market dynamics, shaping the outlook for Wall Street moving into 2025.
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