Treasury yields surge after strong US economic data raises doubts about Federal Reserve rate cuts
On Tuesday, stocks declined as US economic data raised doubts about potential Federal Reserve rate cuts later this year.
Treasury yields surged, reflecting recalibrated inflation expectations, and a sell-off in major tech stocks contributed to market losses, according to CNBC.
The S&P 500 fell 1.11 percent to 5,909.03, while the Nasdaq Composite dropped 1.89 percent to 19,489.68.
The Dow Jones Industrial Average closed at 42,528.36, losing 178.20 points or 0.42 percent. Despite opening higher, all three indices reversed earlier gains.
The Institute for Supply Management reported faster-than-expected growth in the US services sector for December, raising concerns about US inflation persistence.
This led to a rise in bond yields, with the 10-year Treasury yield climbing over 7 basis points to 4.693 percent, briefly reaching 4.699 percent—its highest level since April.
Tom Hainlin, senior investment strategist at US Bank Asset Management Group, commented, “You’re getting a recalibration of (US) inflation expectations and Fed rate expectations. That’s triggered this small sell-off in the equity markets after the earlier enthusiasm.”
He added that the data reflects a strong consumer and labour market, supporting corporate earnings growth.
Tech and semiconductor stocks, which had seen gains in recent sessions, experienced profit-taking. Nvidia dropped 6.2 percent after unveiling new PC chips using Blackwell architecture.
Tesla fell 4 percent following a downgrade by Bank of America, citing valuation risks. Meta Platforms lost nearly 2 percent, while Apple and Microsoft each declined more than 1 percent.
