Stock indexes dipped on Monday, while the U.S. dollar index hit its highest in more than two years, after last week’s blowout U.S. jobs data prompted investors to weigh the possibility that the Federal Reserve may have finished cutting interest rates. U.S. Treasury 10-year yields touched a 14-month high.
Investors are anxiously awaiting Wednesday’s U.S. Consumer Price Index reading. Any upside surprises could underscore the view that the Fed may be done with rate cuts for now. A Reuters poll of economists gives a median forecast for an annual rise of 2.9%, up from November’s 2.7%, and for a monthly increase of 0.3%.
U.S. producer prices data is due on Tuesday.
The December employment report on Friday showed 256,000 workers were added to nonfarm payrolls – well above expectations for a rise of 160,000 and the biggest increase since March.Investors also worry whether inflation could pick up as a result of the policies on tariffs, migration and taxes of U.S. President-elect Donald Trump’s incoming administration.
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As of Monday, the U.S. rate futures market was pricing in just 27 basis points of easing this year, or one rate cut, most likely, either in September or October, according to LSEG estimates.”It’ll be touch and go for the next couple of days until we get the inflation news out of the way,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“The Fed has become more hawkish at this time,” and investors are considering the possibility that the U.S. may have seen the end of rate cuts, Cardillo added. The next Fed policy meeting is scheduled for Jan. 28-29.The benchmark 10-year yield rose to 4.799%, the highest since November 2023, and was last up at 4.796%. U.S. stocks were mixed, with the benchmark S&P 500 and Nasdaq lower as bond yields surged. The Dow was higher.
The Dow Jones Industrial Average rose 327.13 points, or 0.78%, to 42,267.13, the S&P 500 rose 3.51 points,
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