The technology sector leads the fall in stock futures on Wall Street this Monday, while the dollar and bond yields rise due to lower expectations of interest rate cuts ahead of this week’s key US consumer inflation report.
The futures of S&P 500 falls 0.8%while those of Nasdaq 100 (NQ=F) lost 1.2%. The contracts on the Dow Jones Industrial Average, qwhich includes fewer technology stocks, they cut 0.3%.
Stocks are bracing for another tough day after Friday’s slide, which erased all year-to-date gains from Wall Street’s major indexes. Stronger-than-expected December jobs report has rattled marketsraising concerns that signs of strength in the economy will cause the Federal Reserve to keep interest rates higher for longer.
The 10-year bond yield (^TNX) added to recent gains and hit its highest level in 14 months, trading near 4.8%, while the 30-year yield (^TYX) neared 5% at as US bonds sold off. Meanwhile, the dollar (DX-Y.NYB) rose to its highest level in two years against major currencies, with the pound sterling (GBPUSD=X) under particular pressure.
Interest rate cuts in 20205, in doubt
As of Monday, traders are betting there will be no rate cuts until at least September, according to the CME FedWatch tool, and that the Federal Reserve will reduce borrowing costs by only 30 basis points throughout 2025.
This has intensified attention on the December Consumer Price Index report, due out on Wednesday, as a major concern for markets is that inflation will not ease to the Federal Reserve’s 2% target. .
Adding to the concern, oil prices rose around 2% to their highest levels in five months after the US imposed tougher-than-expected sanctions on the Russian oil industry, putting supplies to Russia at risk. China and India. Brent (BZ=F) rose above $81 a barrel, while West Texas Intermediate (CL=F) traded above $78.
On the corporate front, shares of Nvidia (NVDA) and Tesla (TSLA) are declining sharply, as all of the Big Tech “Magnificent Seven” lost ground amid the market turbulence. Europe’s largest pension fund revealed that it sold its entire stake in Tesla due to CEO Elon Musk’s pay package.
The focus is now on rising yields and now rising energy prices. The combination of both factors is the worst possible scenario for the bulls. As of this writing, pre-market weakness is seen in major momentum stocks like Tesla (TSLA) and Nvidia (NVDA).
An important point this morning from the Goldman Sachs team: “The move in rates is also now tightening financial conditions in ways that may weigh on growth and risk assets. “Positions benefiting from lower US yields now look more attractive, especially for portfolios already embracing the US growth theme.”
Source: Ambito
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