In a surprising twist, US stocks have taken a step back, flipping early optimism on its head as investors tread carefully, eyeing the latest economic metrics—especially amid Nvidia’s ambitious strides in the artificial intelligence arena.
The S&P 500 index saw a dip of about 0.4%, while the tech-savvy Nasdaq Composite took a hit of approximately 1.1%. The Dow Jones Industrial Average, however, experienced some midday volatility, managing a slight uptick of around 0.2%.
In the bond market, the 10-year Treasury yield climbed roughly 7 basis points, hovering just beneath the 4.7% mark. This shift has also delayed expectations surrounding the Federal Reserve’s next move on interest rates.
On Tuesday morning, the Institute for Supply Management reported that the manufacturing sector continued its upward trend last month, although the prices paid index spiked to a nearly two-year high of 64.4, jumping from the previous 58.2—a red flag that has caught the Fed’s attention.
Thomas Ryan, an economist at Capital Economics North America, emphasized that this price surge is troubling, suggesting that supercore inflation could remain stubbornly high at 3.5% until mid-next year. His words serve as a crucial reminder that the Fed’s battle against inflation is far from over, especially with looming tariffs and immigration restrictions poised to reignite price pressures.
Additionally, the JOLTS job openings data revealed a more robust than expected rise for November, even as hiring trends displayed a slowdown. The quits rate, often a bellwether of worker confidence, fell slightly to 1.9%, down from 2.1% the previous month.
As the market braces itself for Friday’s pivotal December jobs report, recent statements from Fed officials indicate a more cautious approach to interest rate cuts, considering the resilience of the job market and the persistent inflationary environment.
Currently, investors are almost certain the central bank will keep interest rates steady in the upcoming meeting, as indicated by the CME FedWatch tool.
On the corporate front, shares of Nvidia saw a reversal, dropping around 5% after reaching an all-time high. During CEO Jensen Huang’s recent CES keynote, the company unveiled a groundbreaking AI superchip and other exciting innovations.
Despite Nvidia’s decline, other semiconductor stocks enjoyed a rally, with Micron Technology climbing about 4%, while Asian stocks also made notable gains.
The market is also keeping a close watch on developments regarding Donald Trump’s tariff plans. The president-elect recently refuted claims that his team is considering more targeted measures, which could potentially bolster global economic growth.
LIVE 6 updates -
Trump announces $20 billion foreign investment to build new data centers
President-elect Donald Trump recently unveiled a monumental foreign investment plan aimed at constructing state-of-the-art data centers across the United States, as interest and exploration of artificial intelligence continue to soar.
Trump disclosed that the Dubai-based Damac Group, backed by billionaire Hussain Sajwani, will funnel $20 billion into this ambitious project.
“They feel so strongly about the country that they want to let people know about it,” Trump stated during a press briefing at Mar-a-Lago. “It’s an honor to have such a great investor.”
He indicated that this investment will pave the way for “massive new data centers” primarily in the Midwest and Sunbelt regions, ensuring America remains at the forefront of technology and AI advancements.
The initial phase of the project will kick off in states including Texas, Arizona, Oklahoma, Michigan, and Indiana, among others.
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Latest services data shows fight against inflation is ‘not over’
Recent data from the services sector in December revealed a sharp increase in prices paid, raising alarms about the inflation trajectory.
The Institute of Supply Management’s data indicated that the prices paid index surged to 64.4 in December, up from 58.2 in November. The services index also showed positive movement, climbing to 54.1 from 53.5.
“This leap in prices is worrisome for the Fed, as it suggests persistent inflation,” noted economist Thomas Ryan. “The Fed’s battle against inflation is ongoing, particularly with tariffs and immigration limits likely to add to price pressures in the coming year.”
Following this data release, the 10-year Treasury yield (^TNX) rose sharply, adding around 7 basis points and nearing 4.7%. Speculation about the timing of the Fed’s next rate cut has also shifted.
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Job openings increase more than expected in November
Job openings in November exceeded expectations, shedding light on the current state of the labor market as we analyze when the Federal Reserve might ease interest rates further this year.
According to the latest data from the Bureau of Labor Statistics, there were 8.1 million job openings at the end of November, up from 7.84 million in October, with October’s figures revised upwards.
While the hiring rate dipped to 3.3% from 3.4%, the quits rate—a key indicator of worker confidence—fell to 1.9%, suggesting some caution among employees.
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Stocks open higher
On a positive note, US stocks started on an upward trajectory on Tuesday, with Nvidia once again leading the charge and uplifting market sentiment.
The S&P 500 index edged up by 0.3%, maintaining its position near the tech-driven gains from yesterday. The Dow Jones Industrial Average also saw a rise of 0.3%, while the Nasdaq Composite added about 0.2% to its value.
