US stocks slide as strong data sends Treasury yields higher

US stocks sold off on Tuesday, as government bond yields rose, after strong jobs and services data prompted investors to bet the Federal Reserve will cut interest rates just once in a year. this.

Wall Street’s S&P 500 share gauge fell 1.1 percent, while the tech-heavy Nasdaq Composite closed up 1.9 percent.

Electric car maker Tesla and semiconductor giant Nvidia were among the biggest fallers, sliding more than 4 percent and 6 percent respectively.

In government bond markets, the yield on the 10-year US Treasury – world standard for fixed income assets – rose 0.08 percent to 4.69 percent, which is its highest level since April. Higher yields indicate lower prices.

The moves followed reports that the world’s largest economy remained in good health, raising doubts about whether the major economy how much Feed may cut interest rates later this year.

“The bond market is coming to the conclusion that the Fed is not going to step in, bail us all out with more bailouts and rate cuts,” said Sonal Desai, chief investment officer at Franklin Templeton Fixed Income. “(Investors are) looking at the data and slowly accepting the fact that the economy is very strong.”

The Institute for Supply Management’s list of non-manufacturing managers, a measure of performance in the U.S. general services sector, it rose to 54.1 in Decemberhigher than economists’ expectations of 53.3. A reading above 50 indicates expansion.

Separate data from the US Bureau of Labor Statistics showed there were 8.1 million job vacancies in November, above the forecast of 7.7mn openings, reflecting unexpectedly strong demand. of US workers.

Traders have been watching measures of business activity and the health of the labor market closely for clues as to how far and how fast the Fed will cut interest rates.

After Tuesday’s data, investors were betting the central bank would offer a quarterly rate cut in July, with a 35 percent chance of such a move by the end of the year. Earlier in the day, the odds of a second-quarter cut were around 70 percent.

The Fed began to reduce rates from their 23 years in September and reduced two more before the end of 2024. However, in December policy makers. an indication of the slow pace of easing in 2025, highlighting persistent concerns about inflation and discouraging investors.

With a week shortened by the close of the stock market on Thursday and a half day for bonds, investors are also gearing up for December bond data.

Economists polled by Reuters expect Friday’s figures to show that US employers added 160,000 new positions last month, down sharply from 227,000 in November.

Franklin Templeton’s Desai said “people are waiting for Friday’s non-farm payrolls and are worried that we will recover”.

He added: “If we get a breakout number on Friday, I think you’ll see this trend continue (in Treasury yields).”