NEW YORK (AP) — Wall Street experienced another turbulent session on Wednesday as stocks wavered following Tuesday's tech-driven selloff. Concerns about rising bond yields, elevated valuations, and uncertainty surrounding President-elect Donald Trump's policies continued to weigh on investor sentiment.
Market Overview
The Dow Jones Industrial Average briefly gained 68 points, or 0.2%, reaching 42,596.09 before slipping again. The S&P 500 rose by 13 points (0.2%) to 5,922, and the Nasdaq Composite added 31 points (0.2%) to hit 19,521. Despite these temporary gains, all three major indices have struggled to maintain upward momentum, reflecting broader market anxieties.
Key Factors Impacting Markets
Rising Bond Yields
Tech stocks have been particularly affected by rising bond yields, which increased following strong economic data earlier in the week. The yield on the 10-year U.S. Treasury climbed to 4.698%, further intensifying concerns about higher borrowing costs and their impact on growth stocks.
Elevated Valuations and Inflation Pressures
Mark Hackett, chief of investment research at Nationwide, highlighted that investors are becoming increasingly focused on elevated valuations, rebounding inflation, and the uncertainty of Trump's policy agenda. "The impressive technical tailwind enjoyed by bulls through mid-December has shifted towards a headwind," Hackett noted.
International Market Reactions
In the U.K., the yield on the 10-year gilt surged above 4.8%, marking its highest level since 2008. This spike is partly attributed to fears surrounding Trump's potential tariff policies, which have also pressured the British pound.
Corporate News
Exxon Mobil saw its stock drop by 1.4% after warning that lower oil prices and refining margin pressures would negatively impact fourth-quarter earnings. The WTI benchmark for oil prices fell by 6.5% in Q4, driven by an oil surplus and concerns over China's economic slowdown.
Volatility and Investor Sentiment
The Cboe Volatility Index (VIX), often referred to as Wall Street's "fear gauge," rose 5.72% to 18.84, indicating heightened market volatility. Despite the recent selloff, Nationwide's Hackett observed limited signs of panic among investors, suggesting a possible period of consolidation ahead.
Insights from Analysts
J.J. Kinahan, CEO of IG North America and President of Tastytrade, described the start of 2025 as "inauspicious" for the markets. He noted the psychological significance of round numbers in yields, with the 10-year Treasury yield nearing 4.7% and the 30-year T-bond approaching 5%. Kinahan emphasized the importance of watching whether the S&P 500 can reclaim its 50-day moving average, a critical level for short-term market trends.
Upcoming Events
Investors are closely monitoring the minutes from the Federal Reserve's December meeting, set for release at 2 p.m. Eastern time. Additionally, with U.S. markets closed on Thursday for a national day of mourning for former President Jimmy Carter, traders are preparing for the release of the December jobs report on Friday.
Kinahan advised caution, noting that traders need to adjust their positions ahead of the jobs report. "We saw strong starts fizzle out earlier this week. I want to see stocks not only rally but sustain those gains," he said.
Conclusion
The stock market remains in a precarious position as it navigates rising yields, geopolitical uncertainties, and corporate earnings pressures. Investors will be watching closely for signs of stabilization in the coming days, with key economic reports and Fed communications potentially setting the stage for future market direction.
Commentaires