Stock Market (January 8, 2025) – Economic Data and Rising Yields Weigh on Investor Sentiment

Stock Market (January 8, 2025) – Nvidia Stock Drops Over 6% Despite AI Superchip Announcement

Stock Market (January 8, 2025) – US stock markets reversed earlier gains to end the trading day sharply lower as cautious investors digested new economic data and weighed the outlook for future Federal Reserve actions. Despite Nvidia’s (NVDA) strong plans in the artificial intelligence (AI) space, the company’s stock retreated from its record close.

Major US Indices End Day in the Red

The S&P 500 (^GSPC) fell more than 1.1%, marking a notable retreat after earlier gains. The Nasdaq Composite (^IXIC), heavily influenced by the tech sector, dropped approximately 1.9%, while the Dow Jones Industrial Average (^DJI) fluctuated throughout the session but ultimately closed about 0.4% lower.

The drop in equities was accompanied by a rise in the 10-year Treasury yield (^TNX), which gained roughly 7 basis points, hovering just below 4.7%. This uptick in bond yields further signaled growing concerns over inflation and the potential impact on future Federal Reserve policy.

Economic Data Sets the Stage for Fed’s Next Move

A key report released earlier on Tuesday from the Institute for Supply Management’s (ISM) manufacturing PMI indicated that the manufacturing sector continued to expand in November. However, the prices paid index surged to 64.4, marking the highest level in nearly two years and up from 58.2 in October. This sharp rise in prices has raised concerns about ongoing inflationary pressures.

Thomas Ryan, an economist at Capital Economics North America, noted, “The surge in prices is a worry for the Fed. This serves as a good reminder that the Fed’s fight against inflation is not over, particularly going into a year where tariffs and immigration curbs are set to reignite price pressures.”

Job Market Insights: Rising Openings and Lower Quits Rate

In addition to manufacturing data, the Job Openings and Labor Turnover Survey (JOLTS) revealed that job openings in the US rose more than expected in November, signaling continued labor market tightness. However, fewer hires were made compared to the previous month, and the quits rate—an indicator of worker confidence—fell to 1.9%, down from 2.1% in October.

This data is setting the stage for Friday’s critical December jobs report, which is expected to provide further insights into the health of the labor market. Investors are now placing near-certainty that the Federal Reserve will keep interest rates unchanged during its January meeting. According to the CME FedWatch Tool, traders are also assigning a less than 50% chance that the central bank will cut rates before its June meeting.

Nvidia Stock Retreats Despite AI Superchip Announcement

Despite Nvidia’s bold AI announcements, Nvidia shares reversed earlier gains and fell by over 6% after closing at a record high just one day earlier. The chipmaker was the worst performer in the Dow Jones for the session. During his keynote at the Consumer Electronics Show (CES) on Monday, Nvidia’s CEO Jensen Huang unveiled a new AI superchip among other planned products. Despite these innovations, investors took profits, leading to the sharp decline in Nvidia’s stock price.

Market Outlook: Fed’s Policies and Economic Data to Dominate

As the year progresses, US financial markets are likely to remain highly sensitive to economic data and the Federal Reserve’s policy decisions. The rise in Treasury yields and ongoing concerns about inflation suggest that interest rate hikes may not be entirely over, with future rate cuts being pushed further into 2025. Investors will continue to focus on key reports, including the December jobs report and further inflation data, to gauge the trajectory of both the US economy and Federal Reserve actions.

In conclusion, the combination of rising Treasury yields, inflationary pressures, and cautious market sentiment has contributed to a weak end to the trading day for US stocks. Investors will be closely monitoring upcoming economic data for clues on the Federal Reserve’s next moves and the broader market outlook.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.