The stock market faced notable declines on Tuesday as strong economic data raised questions about potential Federal Reserve rate cuts later this year. This led to a spike in Treasury yields, contributing to the market downturn. The Dow Jones Industrial Average dipped 1.11% to close at 5,909.03, while the Nasdaq Composite lost 178.20 points, or 0.42%, ending at 42,528.36.
The S&P 500 slid 1.89% to 19,489.68. Data from the Institute for Supply Management showed strength in the U.S. services sector in December, adding to concerns about stickier inflation. Bond yields rose on the data, with the 10-year Treasury yield up more than 7 basis points to 4.693%.
Tom Hainlin, senior investment strategist at U.S. Bank Asset Management Group, noted that the ISM number reflects a strong consumer and labor market, tying into a broader picture of strong economic growth favoring corporate earnings growth. Investors also booked profits from megacap tech and semiconductor companies after recent gains. Nvidia shares fell 6.2% after hitting a record, while Microsoft and Apple shares slipped more than 1%.
Stock market reacts to Treasury yields
JPMorgan upgraded Robinhood to a neutral rating from sell, citing the company’s progress in legitimizing its operations. Analyst Kenneth Worthington’s 12-month price target of $43 implies less than a 1% upside for the stock.
Robinhood shares have gained 8% this year, adding to their 192% rally in 2024. Benchmark analyst Cody Acree maintained the firm’s $190 price target on Nvidia, reflecting a 27% upside from Monday’s close, despite a somewhat muted keynote from CEO Jensen Huang at CES in Las Vegas. UBS continues to view U.S. equities and parts of the market exposed to artificial intelligence as attractive, predicting earnings growth to drive another year of concentrated returns.
David Lefkowitz, CIO head of US equities for UBS, expects healthy earnings per share growth of 9% this year. Bernstein upgraded Lululemon to an outperform rating for the first time ever, with analyst Aneesha Sherman’s price target of $460 corresponding to a potential upside of 16% for the stock. Four major food companies reached new 52-week lows on Tuesday, reflecting ongoing challenges in the sector.
Despite the market declines, analysts remain optimistic about certain stocks and sectors, predicting growth driven by solid economic fundamentals.
