NEW YORK, Jan. 7 (Xinhua) — U.S. stocks ended lower on Tuesday, as stronger-than-expected economic data raised doubts about the Federal Reserve’s likelihood of cutting interest rates later in the year.
The Dow Jones Industrial Average fell 178.20 points, or 0.42 percent, to 42,528.36. The S&P 500 sank 66.35 points, or 1.11 percent, to 5,909.03. The Nasdaq Composite Index shed 375.30 points, or 1.89 percent, to 19,489.68.
Nine of the 11 primary S&P 500 sectors ended in red, with technology and consumer discretionary leading the laggards by dropping 2.39 percent and 2.21 percent, respectively. Meanwhile, energy and health led the gainers by going up 1.06 percent and 0.58 percent, respectively.
The Institute for Supply Management (ISM) reported that the U.S. manufacturing sector continued to expand in December. However, the sharp rise in the prices paid index — jumping to 64.4 from 58.2 — indicated mounting inflationary pressures, the highest in nearly two years.
U.S. Treasury yields spiked on the news, extending recent gains driven by expectations that the incoming administration’s tariff plans could accelerate inflation. The yield on the 10-year Treasury note rose more than 7 basis points to 4.693 percent, touching an intraday high of 4.699 percent, its highest level since April.
“You’re getting a recalibration of inflation expectations and Fed rate expectations. That’s triggered this small sell-off in the equity markets after the earlier enthusiasm,” said Tom Hainlin, senior investment strategist at U.S. Bank Asset Management Group.
The labor market also showed resilience. The Job Openings and Labor Turnover Survey (JOLTS) revealed job openings increased by 259,000 to 8.098 million at the end of November. Layoffs remained subdued, and worker quit rates — a signal of employee confidence — were modest.
“There is no signal here of any sudden collapse of the labor market here or imminent recession,” said Carl Weinberg, chief economist at High Frequency Economics. “Instead, these data signal the economy is nearing full employment, not moving away from it. The Fed will find no cause to rush to cut rates, the labor market does not need it.”
Market participants also closely watched the CME FedWatch Tool, which now suggests a 68.7 percent probability of at least a 25-basis-point rate cut by June, rising to 72.9 percent by July. Despite these odds, the robust economic data has cast uncertainty over the Fed’s monetary policy trajectory, contributing to volatility in both equity and bond markets.
