The stock market experienced mixed results on Monday, with Big Tech companies mitigating losses as the dollar and bond yields surged. This movement comes as hopes for interest rate cuts diminish ahead of crucial consumer inflation reports expected this week.
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The S&P 500 managed to close nearly 0.2% higher after a 1% intraday decline, while the Nasdaq Composite dipped 0.4%. Prominent tech giants like Nvidia and Apple recovered from session lows, yet most of the “Magnificent Seven” tech megacaps experienced losses throughout the day. Conversely, the Dow Jones Industrial Average, with its reduced tech exposure, rallied by 0.8%, adding over 350 points.
Market Reacts to December Jobs Report and Anticipates Inflation Data
Monday’s volatile session followed Friday’s sharp market downturn, which erased year-to-date gains for major Wall Street indices. The catalyst for this decline was a robust December jobs report that sparked concerns about sustained economic strength, potentially encouraging the Federal Reserve to maintain higher interest rates for an extended period.
Dow Jones Industrial Average Chart
The 10-year Treasury yield climbed to a 14-month high, hovering around 4.8% as US bonds experienced a sell-off. Simultaneously, the dollar surged to a two-year high against major currencies, with the British pound facing significant pressure.
Current market expectations, based on the CME FedWatch tool, suggest no rate cuts until at least September, with a projected reduction of only 30 basis points throughout 2025. This anticipation intensifies the focus on Wednesday’s release of the December Consumer Price Index (CPI), as a primary market concern revolves around inflation’s potential failure to cool down to the central bank’s 2% target.
Energy Sector Rises Amidst Geopolitical Tensions and Corporate Developments
Oil prices reached five-month highs before retracting slightly after the US implemented stricter sanctions on Russia’s crude oil sector, posing a threat to supply chains for China and India. Brent crude briefly touched $81.01 per barrel, while West Texas Intermediate settled at $78.82.
In corporate news, Moderna’s stock plummeted 16% after the biotech company reduced its 2025 sales forecast by $1 billion due to weakened vaccine demand. Other notable developments included a potential breakup of Honeywell under pressure from activist investor Elliott Investment Management, and a possible joint acquisition bid for US Steel by Cleveland-Cliffs and Nucor following the Biden administration’s blockage of a takeover by Nippon Steel.
Market Uncertainty Prevails as Investors Await Inflation Data
The market exhibited mixed signals on Monday, reflecting the ongoing tension between a strong economy and the potential for persistent inflation. Tech stocks, particularly sensitive to interest rate changes, underperformed as investors reassessed expectations for future Fed policy.
The upcoming CPI report will be a critical data point for investors seeking clarity on the inflation trajectory. A higher-than-expected reading could further solidify expectations of prolonged high interest rates, potentially triggering further market volatility. Conversely, a cooler inflation print could revive hopes for rate cuts and provide support for risk assets. Until then, market uncertainty is likely to persist.
