The latest economic data from the U.S., including service sector activity indicators and the JOLTS report on job openings, have raised concerns on Wall Street. Rising bond yields and fears of persistent inflation have prompted a sell-off in equities, particularly impacting technology stocks. The primary source of uncertainty remains the Federal Reserve’s potential to maintain high interest rates for a longer period than previously anticipated.
Positive economic data from the U.S. have triggered a sharp rise in Treasury bond yields. The 10-year yield reached 4.684%, its highest level since April 2023, reducing the appeal of equities compared to safer fixed-income instruments. As a result, the Nasdaq Composite fell by 1.9%, the S&P 500 by 1.1%, and the Dow Jones by 0.4%. Technology companies, which tend to have high valuations, have been particularly sensitive to interest rate changes.
Increases in service sector activity and job openings suggest a robust economy. According to the ISM index, service sector prices rose to 64.4% in December, the highest level since early 2023. At the same time, job vacancies increased to 8.1 million, partly driven by seasonal hiring. However, over the long term, job openings remain 34% below the record high of March 2022, which may indicate a gradual cooling in the labor market. Workers are less likely to take risks by changing jobs, reflecting concerns about market stability.
Concerns about persistent inflation and an extended period of restrictive monetary policy by the Fed are driving bond yields higher and equity prices lower. Technology companies, which have been market leaders in recent gains, are particularly vulnerable to shifts in investor sentiment. For example, Nvidia shares dropped by 6.2% on Tuesday following a presentation at CES. The decline was attributed to a lack of details about key products such as the Blackwell and Rubin chips.
Investors are increasingly cautious about equities, awaiting further Fed decisions. While macroeconomic indicators signal economic stability, high interest rates and inflation fears remain critical risk factors. In the coming months, the U.S. stock market will face the challenge of elevated capital costs, which could lead to further declines, particularly in high-valuation sectors sensitive to monetary policy changes.
Author: Krzysztof KamiĆski â Oanda TMS Brokers
Source: CEO.com.pl