#US Stock Market Closing Review# On Tuesday (January 7), US stocks collectively closed lower. The strong performance of economic data has tempered market expectations for interest rate cuts by the Federal Reserve this year, while also pushing up US Treasury yields, dragging down the Large Cap as Technology stocks led the decline.
The stock index rose slightly in the morning, but with the release of economic data and the surge in Treasury yields, market sentiment weakened, and all major stock indices fell back.
The S&P 500 index fell 1.12% to 5909.03 points; the Dow Jones Industrial Average fell 178.20 points, a decrease of 0.42%, to 42528.36 points; the Nasdaq Composite Index plummeted 1.89% to 19489.68 points.
(Source: FX168)
(Source: FX168)
Economic Data
Data released by the Institute for Supply Management (ISM) on Tuesday (January 7) shows that the growth rate of service industry activity in the USA in December exceeded expectations, reflecting the continued strength of Consumer activity and the labor market.
This data has further intensified market concerns about inflationary pressures.
Tom Heinlin, a senior investment strategist at Bank of America, stated: 'Inflation expectations and Federal Reserve interest rate expectations are being readjusted. This has triggered a sell-off in the stock market, but it also reflects that economic resilience helps corporate profit growth.'
Recent economic data has significantly cooled market expectations for interest rate cuts by the Federal Reserve this year.
Investors are concerned that inflationary pressures may force the Federal Reserve to maintain higher interest rates for a longer period instead of easing MMF policies as previously expected by the market.
Non-Farm Outlook
Investors will focus on the upcoming USA non-farm employment report to be released this Friday. Economists expect 156,500 new jobs to be added in December, with an unemployment rate of 4.2%. This data could provide clearer guidance on the Federal Reserve's monetary policy path.
Analysts at Bank of America pointed out that if employment data shows moderate growth (with new jobs between 125,000 and 175,000), it may alleviate market concerns about accelerating inflation and stabilize investor sentiment.
Technology stocks led the decline.
The Technology Sector became the largest declining sector of the day, with leading stocks performing particularly weakly.
NVIDIA fell 6.22%. The day before, the company launched a new chip based on the Blackwell architecture and set a historical high for its stock price. However, economic data on Tuesday caused investors to take profits, dragging its stock price sharply lower.
Tesla dropped 4.06% because Bank of America downgraded its rating due to high valuation and significant strategic risks.
Meta Platforms fell nearly 1.95%, while Apple and Microsoft each dropped over 1%.
The decline of these heavyweight technology stocks significantly weighed down the Nasdaq Composite Index and the S&P 500 Index.
Bond market
The yield on the 10-year US Treasury bond rose by more than 7 basis points to 4.693%, reaching as high as 4.699% during the day, the highest level since April.
The rising bond yields have diminished the appeal of stocks, particularly affecting high-valuation Technology stocks.
The market is also monitoring other economic policies that the Trump administration may introduce (such as tariffs and tax policies), which could increase inflationary pressures and further burden USA government debt, thereby continuing to push up bond yields.
Focus on individual stocks
Cintas shares rose by 1.96% after the company announced it would acquire competitor UniFirst at a price of $275 per share. UniFirst shares surged by 20.88%.
Getty shares increased by 24.12%, while Shutterstock rose by 14.81%. Shutterstock and Getty Images announced a merger, forming a visual content company valued at $3.7 billion.
