Stock Market News: Dow Set to Open Down Ahead of Fed Minutes
Stock futures were falling Wednesday after taking a big leg down yesterday as bond yields rose. President-elect Donald Trump and signs of stronger inflation are making traders jumpy at the start of 2025.
Futures for the Dow Jones Industrial Average lost 108 points, or 0.3%. Contracts tied to the S&P 500 fell 0.4%, while futures tracking the tech-heavy Nasdaq 100 retreated 0.5%. All three indexes fell on Tuesday, with the S&P finishing the day 1.1% lower.
The biggest concern at present is what the Federal Reserve will do next. After reducing interest rates by a percentage point at the end of last year, traders are paring back expectations for more cuts this year, which is bad news for stocks. On Tuesday, economic data on the labor market and the services industry suggested economic growth is still robust, firms are still looking to hire, and they have scope to raise prices.
On top of that, Trump renewed talk of tariffs on Tuesday by saying he would penalize Denmark if it doesn’t hand over sovereignty of Greenland. Both levies on imports, which would fan inflation, and the geopolitical uncertainty could add to volatility this year. For now, though, the strength of the economy is probably good for company earnings.
“Already the Fed had warned there is likely to be only two reductions this year, down from four forecast in September, but speculation is brewing that this could be reduced to just one if price pressures persist,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Longer term borrowing costs have been rising. The yield on the 10-year U.S. Treasury was at 4.723%, up from 4.629% yesterday and 4.57% at the end of last week. The 2-year note yielded 4.304%, compared with 4.25% last week.