U.S. Stocks Pull Back Sharply After Seeing Initial Strength

Stocks moved higher early in the session on Tuesday but pulled back sharply over the course of the trading day. The major averages all moved to the downside on the day, with the tech-heavy Nasdaq leading the way lower.

The major averages climbed off their worst levels going into the close but remained firmly in the red. The Nasdaq tumbled 375.30 points or 1.9 percent to 19,489.68, the S&P 500 slumped 66.35 points or 1.1 percent to 5,909.03 and the Dow fell 178.20 points or 0.4 percent to 42,528.36.

The sharp pullback by stocks came amid a notable increase by treasury yields, with the yield on the benchmark ten-year note surging to its highest closing level in eight months.

The jump by treasury yields, which led to concerns about the outlook for interest rates, came following the release of some upbeat U.S. economic data.

The Institute for Supply Management released a report showing its reading on U.S. service sector activity increased by more than expected in the month of December.

The ISM said its services PMI climbed to 54.1 in December from 52.1 in November, with a reading above 50 indicating growth. Economists had expected the index to rise to 53.3.

The report also said the prices index surged to 64.4 in December from 58.2 in November, climbing above 60 for the first time since January 2024. The sharp increase by the index has led to worries services inflation will remain sticky.

A separate report released by the Labor Department showed job openings in the U.S. unexpectedly increased in the month of November.

Bill Adams, Chief Economist for Comerica Bank, said the data “bolster the view that the Fed will cut rates slower this year than expected before the election.”

The weakness on Wall Street also came amid a slump by shares of Nvidia (NVDA), with the AI darling and market leader plunging by 6.2 percent after reaching a record intraday high.

Shares of Tesla (TSLA) also tumbled by 4.0 percent after Bank of America downgraded its rating on the electric vehicle maker’s stock to Neutral from Buy.

Software, semiconductor and computer hardware stocks saw significant weakness on the day, contributing to the steep drop by the tech-heavy Nasdaq.

Considerable weakness was also visible among retail sales stocks, as reflected by the 1.4 percent loss posted by the Dow Jones U.S. Retail Index.

Housing, brokerage and telecom stocks also showed notable moves to the upside, while airline, oil and gold stocks bucked the downward trend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Tuesday. Japan’s Nikkei 225 Index surged by 2.0 percent and China’s Shanghai Composite Index advanced by 0.7 percent, although Hong Kong’s Hang Seng Index bucked the uptrend and slumped by 1.2 percent.

Most European stocks also moved to the upside on the day. While the U.K.’s FTSE 100 Index edged down by 0.1 percent, the German DAX Index and the French CAC 40 Index both climbed by 0.6 percent.

In the bond market, treasuries moved notably lower, extending the downward move seen over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 6.5 basis points to an eight-month closing high of 4.683 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to the latest U.S. economic data along with the minutes of the latest Federal Reserve meeting,

https://www.howestreet.com/2025/01/while-market-soft-some-individual-stocks-still-hot-mark-leibovit/

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COME ON, DAD. IT’S TIME TO EAT

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