Stock prices fall and bond yields rise as interest rate cut expectations fade

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U.S. stocks fell on Wednesday and bond yields rose as new jobs data dampened optimism about a rapid interest rate cut.

The Dow Jones Industrial Average (^DJI) was down 0.6%, and the benchmark S&P 500 (^GSPC) was down about 0.6%. The Nasdaq Composite Index (^IXIC) fell about 0.9% after tech stocks were hurt by about 1.6%.

Signs of further cooling in the U.S. labor market greeted investors on Wednesday. There were 8.79 million job openings at the end of November, the lowest level since March 2021, according to new data from the Bureau of Labor Statistics. Economists surveyed by Bloomberg had expected 8.82 million jobs.

Hopes that the year-end market rally would continue into 2024 were dashed on Tuesday as stock indexes and bond prices fell in tandem, marking the worst start to the year in decades. Bond prices fell for the fourth day in a row, with the 10-year US Treasury yield (^TNX) rising nearly 4%.

read more: Impact of the Fed’s interest rate hike suspension on bank accounts, CDs, loans, and credit cards

Minutes from the December Fed meeting, scheduled for later Wednesday, could provide clues as to how much tightening officials think they will ease to ensure a successful “soft landing” for the economy.

Stocks were little changed after the latest Federal Reserve minutes were released Wednesday afternoon. Minutes of the meeting revealed that Fed officials believe the “upside risks” to inflation have diminished.

“Nearly all participants expressed the view that lowering the target range for the federal funds rate by the end of 2024 is appropriate.” The minutes read as follows:

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Thursday, January 4, 2024 12:09 AM GMT+5:30

Wednesday Afternoon Trend Ticker

SOFI stock topped Yahoo Finance’s trend ticker page with its share price dropping about 13% on Wednesday after the financial services company was downgraded from market perform to underperform by KBW. KBW analyst Mike Perrito thinks the recent jump in stocks, which is up nearly 30% in the last month, may have been overdone.

Xerox (XRX) shares fell more than 8% after the company announced plans to cut 15% of its workforce.

Eli Lilly (LLY) stock rose about 4% to an eight-week high. UBS on Wednesday named Eli Lili one of its top drug stocks for 2024, citing upgrades to its weight-loss drug Munjaro among other factors driving the stock’s price up this year.

AMC (AMC) stock hit an all-time low on Wednesday. Ever since I became a fan of meme stocks, the stock has struggled amid the reopening from coronavirus lockdowns and the Hollywood strike. In 2023, AMC stock fell 83%.
Wednesday, January 3, 2024, 10:59 PM GMT+5:30

Real estate weighs on Wednesday’s trading

The interest rate-sensitive sector had been surging since early November as investors increasingly bet on a soft landing.

However, some skepticism has entered the 2024 theory, with sectors such as real estate (XLRE), which have risen in the recent market rally, showing some gains.

Real estate was the biggest laggard among 11 sectors on Thursday, down nearly 2% by 12:30 p.m. ET. The S&P 500 (^GSPC) fell about 0.7%.

Source: Yahoo Finance

Notably, today’s market move comes as investors’ bets on a rate cut in March have eased. As of Thursday, investors saw a roughly 75% chance of a rate cut in March, according to the CME FedWatch tool. This is down from the 90% probability investors were seeing a week ago.
Wednesday, January 3, 2024, 10:05 PM GMT+5:30

Economist says there is ‘little hope’ for manufacturing recovery so far

The December ISM manufacturing report released on Wednesday showed the sector has been in contraction for the 14th consecutive month.

However, the index’s reading of 47.4 was higher than last month’s reading of 46.7 and also beat Wall Street’s expectations of 47.1.

But Thomas Simmons, U.S. economist at Jefferies, said he doesn’t think the turnaround has happened yet, with the index only slightly above its lowest level in six months.

“The environment for capital spending remains very challenging due to high interest rates and economic uncertainty,” Simmons said in a note to clients on Wednesday. “Flimsy expectations that a rate cut is on the horizon pose an upside risk to the sector going forward, but recovery is still a long way off.”

But economists said there were some bright spots in the report, including a decline in the price paid component, which showed positive signs in the fight against inflation.

“The data do not show strong signs of any change in the ongoing goods disinflationary trend,” Simmons wrote.
Wednesday, January 3, 2024, 9:22pm GMT+5:30

Crude oil prices rise 3% due to supply concerns

Oil futures rose more than 3% on Wednesday amid supply concerns following reports of disruptions at Libya’s main oil fields.

West Texas Intermediate (CL=F) rose to $72.75 per barrel in morning trading. Brent (BZ=F) hit a trading high of $78.29.

Futures prices have been volatile in recent sessions due to concerns about rising tensions in the Red Sea, which connects to the Suez Canal, a major shipping route.

Crude oil oscillated between positive and negative territory on Tuesday after Iran sent warships to the Red Sea.

“The real threat to prices is Iranian oil exports (nearly 2 million barrels per day) that could suddenly be removed from global markets,” Dennis Kistler, senior vice president at BOK Financial, said in a note to clients Wednesday. said.
Wednesday, January 3, 2024, 8:49pm GMT+5:30

Job openings reached lowest level since March 2021

Job openings in November were at their lowest level since March 2021, lower than Wall Street expectations and reflecting continued cooling in the labor market through the end of 2023.

New data from the Bureau of Labor Statistics released Wednesday showed there were 8.79 million job openings at the end of November, down slightly from 8.85 million job openings in October. Economists surveyed by Bloomberg had expected 8.82 million job openings.

The report also showed that the turnover rate, a sign of worker confidence, fell to 2.2% from 2.3% the previous month. In addition, the JOLTS report showed that employment for the month was 5.5 million, down slightly from last month’s 5.9 million.
Wednesday, January 3, 2024, 8:08pm (GMT+5:30)

Technology is lagging behind in the open world.

Bond yields rose as tech stocks fell on Wednesday, continuing a trend seen a day earlier.

The Dow Jones Industrial Average (^DJI) was down 0.3%, and the benchmark S&P 500 (^GSPC) was down about 0.5%. The Nasdaq Composite Index (^IXIC) fell about 0.7% after a painful session in which tech stocks fell about 1.6%.

Meanwhile, bonds fell for the fourth straight day, with the 10-year Treasury yield (^TNX) rising nearly 4%.

The move comes after Tuesday marked the Nasdaq’s worst start to the year since 1972.
Wednesday, January 3, 2024, 4:58 PM GMT+5:30

Labor market attracts attention

After a rough first day of trading, investors’ attention on Wednesday will turn to the labor market. A monthly update on job openings and turnover, known as the JOLTS Report, will be released at 10 a.m. ET.

A decline in job openings throughout 2023 would be an early indicator that the U.S. labor market is slowing, and Wednesday’s data will be a key table-setter ahead of Friday’s December jobs report.

Wednesday’s report predicted there would be 8.85 million job openings at the end of November.