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14.01.2025 11:57 AM
The Nasdaq ended the day lower on Monday, while the S&P 500 posted a modest gain, bouncing off a two-month low. The volatility was driven by high Treasury yields, which are due to investors revising their expectations about a possible interest rate cut by the Federal Reserve (Fed).
The latest economic reports show that the U.S. economy remains resilient, with prices rising steadily. The data has added to the pressure on stocks as investors begin to price in higher inflation risks.
The comments from Fed officials were another factor that helped push up Treasury yields. Against this backdrop, the S&P 500 has ended the week with losses in four of the past five weeks, reflecting ongoing uncertainty among market participants.
Additional concerns have been raised by tariff measures proposed by former President Donald Trump, which have heightened inflation fears. Protectionist policies have traditionally been seen by markets as a factor that can accelerate inflation, adding to investor jitters.
Treasury yields hit new highs, with the benchmark 10-year note hitting a 14-month high of 4.805%, up 1.6 basis points to end the day at 4.79%.
The market is now pricing in a 27 basis point rate cut by the end of the year, with a 52.9% chance of a cut in June. The data shows that investors continue to closely monitor economic data and Fed statements when assessing the outlook for monetary policy.
US equity markets remain under the influence of a complex mix of economic and political factors. Investors will need to closely monitor macroeconomic indicators and policy actions to adapt their strategies to the changing environment.
The trading day ended with mixed results for key US indices. The Dow Jones Industrial Average rose 358.67 points (+0.86%) to 42,297.12. The S&P 500 also showed a slight increase, adding 9.18 points (+0.16%) to close at 5,836.22. At the same time, the Nasdaq Composite lost 73.53 points (-0.38%) to close at 19,088.10.
UnitedHealth Group was the main driver of the Dow's growth, with shares rising 3.93%. This happened against the backdrop of the Biden administration's initiative to revise Medicare Advantage reimbursement rates. According to the new proposal, payments under these plans, managed by private insurers, will increase by 2.2% in 2026.
Shares of CVS Health and Humana also rose about 7% on the news, pushing the S&P 500 healthcare sector up 1.27%.
Despite the gains in healthcare, utilities and technology were among the worst performers. Edison International shares plunged more than 11.89% after it was reported that the company was named as a defendant in a lawsuit related to the Southern California wildfire.
In contrast, the energy sector posted the most impressive gains among the 11 key S&P 500 sectors, climbing 2.25%. The sharp rise was driven by the continued rise in oil prices. Investors expect that tightening U.S. sanctions on Russian oil will force major markets like India and China to look for alternative suppliers.
U.S. stock markets continue to paint a mixed picture. While healthcare and energy provide pockets of growth, pressure on utilities and technology companies reflects the volatile nature of the current economic landscape. Investors are closely monitoring political and economic developments to quickly adapt their strategies to new challenges.
Wednesday is set to be a big day for global markets, with the release of the Federal Reserve's Consumer Price Index (CPI) and Beige Book report set to significantly impact market participants' expectations for the future of U.S. monetary policy. The data will be another indicator of how inflationary pressures and economic activity are changing the Fed's stance.
As the U.S. tightens export policies, chip-related stocks suffered significant losses. Nvidia fell 1.97% and Micron Technology fell 4.31%. The moves came after the government announced plans to impose additional restrictions on the export of chips and artificial intelligence-related technologies. As a result, the PHLX semiconductor index fell, reflecting the overall decline in the sector.
Vaccine maker Moderna saw its shares slide sharply, losing 16.8%, the biggest daily drop in the S&P 500. Investors reacted negatively to a $1 billion cut to the company's 2025 sales forecast.
Despite the turbulence seen in markets, U.S. and European futures showed signs of recovery on Tuesday. The Nasdaq 100 gained 0.5% in Asia after falling earlier in New York. S&P 500 futures rose 0.3%, while European futures rose 0.8%, showing investors' hopes for stability.
While European futures showed solid gains, Asian indices were less stable. Japan's Nikkei declined, reflecting investor concerns about upcoming inflation data and the global economic situation.
The start of Donald Trump's second term as US President, while controversial, adds a new layer of uncertainty. His economic policies and possible changes in US trade and foreign policy relations could add pressure on markets.
Markets are holding their breath ahead of major economic events. Investors are closely watching inflation data and government actions to adjust their strategies in a high-risk environment. The next few days could be decisive for shaping the new economic course.
Amid growing concerns about interest rate hikes, Japan's Nikkei index fell 1.8%, hitting its lowest in six weeks. Speculation about a possible change in the Bank of Japan's monetary policy was the main reason for the sell-off in stocks.
In a speech to business leaders, Bank of Japan Deputy Governor Rezo Himino hinted at a rate hike at the upcoming meeting on January 24. The move could signal a tightening of monetary policy, leaving investors cautious.
Asian chip makers continue to come under pressure after the US imposed new restrictions on technology exports. However, China has been an exception, with local companies rising on expectations of a larger domestic market share and speculation of possible government support.
The Shanghai Composite Index gained 2.5%, its best performance since November last year. Hong Kong's HSTECH Index also posted strong gains, jumping more than 3%. The results reflect investor confidence in the domestic tech industry despite geopolitical tensions.
Out of Asia, investors are focusing on rates, especially after strong US employment data. The labor market report weighed on Fed rate cut hopes as a strengthening economy reduces the need for stimulus.
The yield on the 10-year U.S. Treasury note settled at 4.76%, down slightly from a record 4.805% in New York. That was the highest since November 2023. Current market expectations are for a 29 basis point Fed rate cut by year-end, but investors remain cautious.
Markets are mixed amid global macroeconomic changes. While China strengthens its tech industry, Japan faces the risk of higher rates. Investors are closely monitoring central bank moves and global economic signals to adjust their strategies amid uncertainty.
Oil prices continue to rally, hitting four-month highs, driven by signs of supply cuts from Russia amid growing sanctions pressure from the United States. Brent crude confidently broke its 200-day moving average, settling at $80.52 a barrel on Tuesday.
Tightening economic measures and uncertainty over Donald Trump's tax, immigration and trade policies are adding to concerns about rising inflation, putting further pressure on energy markets.
The cryptocurrency market has also felt a wave of instability, which is traditionally associated with macroeconomic factors. Bitcoin, which is just below the $95,000 mark, has lost almost 7% of its value over the past week. This decline reflects a decrease in risk appetite amid tightening global economic conditions.
On the foreign exchange market, the euro demonstrated resilience, trading at $1.0249, slightly moving away from a two-year low reached yesterday. The Japanese yen, on the other hand, continues to decline, reaching 157.59 per dollar. This is happening amid expectations of a possible interest rate hike by the Bank of Japan.
The Australian and New Zealand dollars, which have been under pressure in recent weeks, have finally strengthened slightly. Investors are using this pause to reassess their positions amid global economic changes.
The dollar index, which measures the dollar against a basket of major currencies, hit a two-year high of 110.17, although it had corrected to 109.57 by Tuesday morning. That reflects strong demand for the dollar as a safe haven amid economic uncertainty.
The US corporate earnings season kicks off on Wednesday. Among the first companies to release their fourth-quarter financial results are major players in the banking sector, including Citi and JPMorgan Chase. The reports could set the tone for the rest of the season, showing how the financial sector is coping with rising rates and inflationary pressures.
Rising volatility across the board, from oil and currencies to cryptocurrencies and corporate earnings, suggests the global economy is going through a period of heightened stress. Investors are eagerly awaiting further data to adjust their strategies and assess the long-term outlook.
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*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
