On Tuesday, the stock market experienced significant downturns as robust economic indicators prompted speculation regarding possible Federal Reserve interest rate reductions later in the year. This uncertainty triggered a rise in Treasury yields, which played a role in the market’s slump. The Dow Jones Industrial Average fell by 1.11%, closing at 5,909.03, while the Nasdaq Composite experienced a decrease of 178.20 points, equating to a drop of 0.42%, finishing at 42,528.36.
The S&P 500 dropped by 1.89% to reach 19,489.68. Reports from the Institute for Supply Management indicated a resilient U.S. services sector in December, raising apprehensions about persistent inflation. As a result, bond yields surged, with the 10-year Treasury note yield climbing over 7 basis points to 4.693%.
Tom Hainlin, the senior investment strategist at U.S. Bank Asset Management Group, remarked that the ISM data reflects a robust consumer base and labor market, contributing to a wider narrative of solid economic expansion that benefits corporate earnings. Following recent profits, investors also took gains from large-cap technology and semiconductor firms. Shares of Nvidia saw a decline of 6.2% after reaching an all-time high, while both Microsoft and Apple shares fell by more than 1%.
Market Response to Rising Treasury Yields
JPMorgan has revised Robinhood’s rating from sell to neutral, acknowledging the firm’s advancements in legitimizing its operations. Analyst Kenneth Worthington set a 12-month price objective of $43 for the stock, which indicates less than a 1% potential increase.
Robinhood’s shares have appreciated by 8% this year, adding to their impressive 192% increase in 2024. Benchmark analyst Cody Acree upheld the firm’s $190 price target for Nvidia, suggesting a 27% increase from Monday’s close, notwithstanding a somewhat understated keynote by CEO Jensen Huang at CES in Las Vegas. UBS maintains an optimistic outlook on U.S. equities and specific sectors related to artificial intelligence, forecasting earnings growth to propel another year of focused returns.
David Lefkowitz, chief investment officer for U.S. equities at UBS, anticipates a robust earnings per share growth of 9% this year. Bernstein has upgraded Lululemon’s rating to outperform for the first time, with analyst Aneesha Sherman setting a price target of $460, which represents a potential upside of 16%. Four major food companies hit new lows for the year on Tuesday, underscoring the continuing struggles within the sector.
Despite the downturn, analysts maintain a positive outlook on specific stocks and industries, forecasting growth driven by solid economic fundamentals.
