The roaring rally in US stocks lost steam on Tuesday as investors assessed whether the recent buying spree had been overdone and considered the implications of President-elect Donald Trump’s Cabinet picks. The Dow Jones Industrial Average (DJIA) slid nearly 0.8%, losing almost 350 points. The S&P 500 fell more than 0.2%, and the tech-heavy Nasdaq Composite was down roughly 0.1%, paring earlier losses.
Boeing was one of the laggards in the Dow, falling more than 2.5% due to worker strikes in October. Both the S&P 500 and Dow had their worst day since October 31. The breather in equities came as Treasury yields ticked higher, with the 10-year Treasury yield adding about 12 basis points to hit approximately 4.43%.
Wall Street analysts are signaling that the post-election surge in stocks could soon sputter after lifting the major indices to record highs. Investors have increased their exposure to US stocks, but concerns are growing about the potential policy impact of Trump’s likely Cabinet picks. Bitcoin’s record-breaking rally continued, with the cryptocurrency nearing $90,000 as markets closed.
At 4 p.m. ET, bitcoin was trading around $89,600 per coin. Investors will be closely watching to see if it crosses the $90,000 mark for the first time in overnight trading. Meanwhile, the so-called ‘Trump trade,’ which saw cryptocurrency-related stocks and Tesla surging higher since Trump’s election win, took a breather.
Shares of Coinbase, which offers cryptocurrency trading on its platform, were down more than 2%. Similarly, Robinhood, which also offers crypto trading, was down about 1% on Tuesday after a large rally. Tesla, which had previously rallied over 40% in the past five sessions, was down more than 5%.
Federal Reserve Bank of Minneapolis President Neel Kashkari suggested that a surprise in inflation data could prompt the central bank to pause cutting interest rates.
Trump’s nominees affect market sentiment
“It’d be hard to imagine the labor market really heating up between now and December,” Kashkari said.
“There’d have to be a surprise on the inflation front to change the outlook so dramatically.” Markets are currently pricing in a 59% chance that the Federal Reserve will cut interest rates at its December meeting. Boeing stock sank as much as 3% on Tuesday after the company reported a sharp decline in October deliveries due to a seven-week strike by its biggest union, which crippled much of its production. The drop in deliveries underscores the production setbacks during the strike, which ended last week but cost Boeing billions in lost earnings and temporarily stalled its turnaround efforts.
Bank of America CEO Brian Moynihan supported Federal Reserve Chairman Jerome Powell’s stance on maintaining the central bank’s independence from political influence. “At the end of the day, an independent central bank is a good place to be,” Moynihan said. “We have to be careful because countries without such independence don’t fare as well.”
As of Tuesday, all three major averages hovered near session lows just before 12:30 p.m. ET.
The Dow Jones Industrial Average slid about 0.6%, losing more than 250 points, while the S&P 500 fell about 0.4%, and the Nasdaq Composite slipped about 0.3%. Treasury yields were also on the rise, with the 10-year Treasury yield nearly hitting 4.42% and the 2-year Treasury moving up to its highest level since late July. In other news, Snap stock fell about 4% on Tuesday following a report that President-elect Donald Trump is expected to try to halt a potential U.S. ban of TikTok.
Snap, a direct competitor to TikTok, had been seen as a potential beneficiary of a U.S. ban on the popular short-video app. Consumers’ inflation expectations continue to decline, with a new October survey from the Federal Reserve Bank of New York showing expectations at 2.9% in one year, marking the lowest one-year outlook in four years. This falls in line with other surveys indicating lower inflation expectations.
BlackRock Chief Investment Officer of Global Fixed Income Rick Rieder commented on the high price-to-earnings multiples in the market. “I don’t love the multiple” on stocks, Rieder said, citing demand for stocks via 401(k) flows and company buybacks as creating a bullish technical backdrop for equities. “Companies are buying back a bunch of their stock, and there’s no sellers,” Rieder noted.
