01/10/2025 Summary of the US Stock Market

The US stock market closed lower on January 10, 2025, as stronger-than-expected labor market data tempered expectations for Federal Reserve rate cuts, leading to a selloff in equities and a rise in Treasury yields.

Major Indices:

• S&P 500 Index: Fell sharply, recording its largest single-day drop since December 18, wiping out its gains for 2025 so far.
• Dow Jones Industrial Average: Declined modestly as small-cap stocks dropped nearly 10% from recent highs.
• Nasdaq Composite: Closed lower amid a broad selloff in risk assets.
• 10-Year Treasury Yield: Surged, while the 30-year Treasury yield briefly exceeded 5%.

Key Market Drivers:

1. Strong Labor Data:
December’s nonfarm payrolls showed the largest monthly increase since March, with unemployment unexpectedly declining. This dampened hopes for aggressive rate cuts in 2025.
2. Inflation Concerns:
Long-term inflation expectations reached their highest level since 2008. This, combined with a surge in oil prices, heightened market unease.
3. Revised Fed Outlook:
Major Wall Street firms adjusted their forecasts for Federal Reserve rate cuts:
• Bank of America: Withdrew its expectation for two 25-basis-point cuts, suggesting a potential rate hike instead.
• Citigroup: Maintained its forecast for five cuts but pushed the timeline beyond May.
• Goldman Sachs: Revised its outlook from three cuts to two.

Sector Highlights:

• Technology:
Tesla (TSLA): Announced the launch of its Model Y “Juniper.”
Hewlett Packard Enterprise (HPE): Reportedly secured a $1 billion server contract with X (formerly Twitter).
• Energy:
Constellation Energy (CEG): Announced the acquisition of Calpine Corporation.
• Airlines:
Delta Airlines (DAL): Posted earnings that beat expectations.

Market Commentary:

• Scott Len (Wells Fargo): “Today’s labor data is positive for the economy but a headwind for markets in the short term.”
• Neil Burrell (Premier Miton Investors): “Good for economic growth but disappointing for investors hoping for rate cuts.”
• Steve Sosnick (Interactive Brokers): “Investors are more focused on potential monetary easing than on strong economic fundamentals.”
• Gina Bolvin (Bolvin Wealth Management): “Lowered rate-cut expectations could increase volatility; investors should remain cautious.”
• Guy Stear (Amundi Investments): “Concerns are mounting that the Fed may not cut rates at all, adding pressure on markets.”
• Brett Kenwell (eToro): “While the labor market’s strength may disappoint some investors, it signals resilience in the economy.”
• Scott Helfstein (Global X): “We’re back to the scenario where good news is bad news for markets.”

Upcoming Events:
• Earnings Season: Begins next week with the financial sector leading the charge.
• CPI Data (January 15): December Consumer Price Index is expected to rise 2.9% for the third consecutive month.

The market remains focused on inflation and interest rate dynamics as investors brace for increased volatility ahead.