S&P 500, Nasdaq fall as traders dial again bets on Fed fee cuts in 2025

By Johann M Cherian and Sukriti Gupta

(Reuters) -U.S. shares declined on Monday, with the S&P 500 hitting a two-month low as bond yields surged following sturdy payroll knowledge final week, reinforcing bets that the Federal Reserve will keep a hawkish stance via many of the 12 months.

At 11:39 a.m. ET, the Dow Jones Industrial Common rose 93.86 factors, or 0.22%, to 42,032.31, the S&P 500 misplaced 36.53 factors, or 0.63%, to five,790.51, and the Nasdaq Composite misplaced 254.71 factors, or 1.33%, to 18,906.92.

Wall Road’s worry gauge rose 1 level, touching a greater than three-week excessive.

The domestically delicate Russell 2000 index declined 0.9% to its lowest stage since September 2024, extending Friday’s decline, which noticed it enter correction territory after falling greater than 10% from its November intraday report excessive.

Pressuring shares, yields on longer-dated Treasury bonds are pinned at multi-month highs. [US/]

At one level, merchants had been now not totally pricing in even one Fed fee minimize this 12 months, in line with knowledge compiled by LSEG, from about 43 foundation factors earlier than Friday’s job figures. Bets at present replicate expectations of a 25.6 bps easing by the Fed’s December assembly.

“Within the early levels of recalibrating financial coverage, traders are inclined to take a little bit of a risk-off perspective,” stated Artwork Hogan, chief market strategist at B Riley Wealth.

“However the necessary a part of what has modified up to now this 12 months is that financial knowledge being constructive on the finish of the day will possible be a web constructive for company earnings and for markets.”

5 of the 11 S&P 500 sectors declined, led by a 2% drop in Utilities. Megacaps had been down, with Tesla (NASDAQ:TSLA) sliding 1.5%, Apple (NASDAQ:AAPL) dropping 2.4% and Alphabet (NASDAQ:GOOGL) dropping 1.6%, sending the Nasdaq to a greater than one-month low.

On the flip aspect, Power rose 2.2%, monitoring increased crude costs. The S&P 500 equal-weighted index was up 0.1%.

The principle indexes logged their second consecutive week of declines within the earlier session after a number of stories pointed to better-than-expected financial exercise, elevating worries that inflation might be operating excessive.

Traders additionally priced within the probability that the incoming Donald Trump administration’s insurance policies – resembling tariffs and a clampdown on unlawful immigration – might threaten international commerce and gas value pressures when the Fed has additionally signaled a cloudy financial coverage outlook. Trump is predicted to take workplace on Jan. 20.

The Shopper Value Index numbers and the central financial institution’s Beige E book on financial exercise, each due on Wednesday, will possible assist traders gauge the Fed’s coverage outlook.

Some chip shares fell, with Nvidia (NASDAQ:NVDA) dropping 2.9% and Superior Micro Gadgets (NASDAQ:AMD) slipping 0.5% after the U.S. authorities stated it will additional limit artificial-intelligence chip and expertise exports.

Moderna (NASDAQ:MRNA) slid 21.8% to the underside of the S&P 500 after slashing its 2025 gross sales forecast by $1 billion.

Dow element UnitedHealth Group (NYSE:UNH) added 4.3%, CVS Well being (NYSE:CVS) rose 5.6% and Humana (NYSE:HUM) climbed 7.4% after the Biden administration proposed 2026 reimbursement charges for Medicare Benefit plans run by non-public insurers, which might lead to a 2.2% enhance in funds.

Declining points outnumbered advancers by a 1.74-to-1 ratio on the NYSE, and by a 2.22-to-1 ratio on the Nasdaq.

The S&P 500 posted two new 52-week highs and 23 new lows, whereas the Nasdaq Composite recorded 19 new highs and 209 new lows.