NEW YORK — On Monday, Wall Street faced downward pressure, primarily fueled by declines in shares of Nvidia and other major tech companies, continuing a trend that has kept the market in a prolonged slump.
As of early afternoon trading, the S&P 500 was down by 0.2%, marking its fourth loss out of the past five weeks. The Nasdaq composite fell by 0.8%, while the Dow Jones Industrial Average stood apart with a gain of 214 points, or 0.5%.
The market’s challenges over the past month stem from reduced expectations regarding potential interest rate cuts from the Federal Reserve this year. Such adjustments in rates could potentially invigorate the economy. The significant growth of the U.S. stock market over the previous year relied heavily on the anticipation of lower rates following the Fed’s decision to start decreasing them in September. However, persistently high inflation rates have remained above the Fed’s 2% target, and recent economic reports indicate that the U.S. economy is robust enough to thrive without significant rate reductions. This has raised doubts about whether the Fed will implement any cuts in 2025.
With higher rates exerting downward pressure across various investment categories, those perceived as overpriced often suffer the most. Nvidia experienced a drop of 2.5%, making it a significant drag on the S&P 500, even though this decrease represents only a fraction of its substantial gains over the past few years, with the company’s stock having nearly quintupled during a surge in artificial intelligence technology. The chipmaker’s stock encountered pressure following President Biden’s announcement of a new strategy for exporting advanced computer chips essential for AI development, which has drawn warnings from industry leaders about potential disruptions to global supply chains and negative impacts on U.S. businesses.
In addition, Apple and Microsoft also contributed to the market’s difficulties, posting declines of 1.6% and 0.9%, respectively. Their large market capitalizations mean their performance heavily influences the S&P 500, which is currently trending towards another loss, even as more stocks within the index are rising than falling.
Moderna’s stock dropped sharply by 20.7%, marking the steepest decline in the S&P 500 after the company projected revenues for the upcoming year that fell short of analysts’ expectations. As COVID-related sales continue to wane, the vaccine producer is accelerating cost-reduction efforts, which include slashing expenses in areas such as research and development. Similarly, Macy’s shares fell by 6.8% after the company indicated that its revenue for the last quarter of 2024 would likely land at or slightly below the previously forecasted range of $7.8 to $8 billion.
On a brighter note, oil and gas companies experienced gains as oil prices rose. A barrel of benchmark U.S. crude increased by 3.1% to $78.92, while Brent crude saw a 1.7% rise to $81.13. Following an announcement from the Biden administration about the expansion of sanctions against Russia’s energy sector, Exxon Mobil’s stock climbed by 2.2%, and Valero Energy surged by 5.4%.
In the bond market, which has been significantly influencing Wall Street’s activities lately, Treasury yields continued an upward trend. The yield on the 10-year Treasury rose to 4.78%, up from 4.76% late on Friday. This climb has been persistent over the last month, having been below 3.65% just a few months ago in September. The strong performance of the U.S. economy has propelled these rising yields, alongside concerns that potential tariffs and policies from the incoming administration may drive both inflation and economic growth.
Investors are awaiting a government report on inflation set to be released on Wednesday. This report is expected to show a slight increase in inflation, rising to 2.8% in December from 2.7% in November. Analysts suggest that “rates remain the most crucial factor steering the equity market’s direction.”
In addition to inflation data and interest rates, the upcoming week will also usher in earnings reports from major banking institutions like Bank of America and JPMorgan Chase, marking the beginning of the earnings reporting season. If Treasury yields keep rising, either stock prices will need to adjust downward, or companies will have to demonstrate significant profit growth to compensate for the increased yields.
Across international markets, stock indexes largely declined in both Europe and Asia. In Hong Kong, stocks fell by 1%, and Shanghai witnessed a decrease of 0.2%, despite China’s report indicating that its exports in December grew at a pace surpassing expectations. Factories hurried to fulfill orders in anticipation of the higher tariffs that the incoming administration has threatened to implement.
