US Stocks Dip as Trump Tariff Plans and Rising Bond Yields Rattle Markets
US stocks experienced a decline on Wednesday as traders reacted to reports about President-elect Donald Trump’s potential tariff plans and rising bond yields. The market’s response comes amid speculation that Trump may use emergency powers to implement new tariffs, a move that has sparked concern among investors.
According to sources familiar with the matter, the Trump-Vance transition team is considering declaring a national emergency to enact tariffs. While all options are reportedly on the table, the team has not yet commented on these reports.
In tandem with the tariff concerns, bond yields have surged, with the 10-year US Treasury yield climbing above 4.7% for the first time since last spring. The yield reached 4.707%, its highest level since April, signaling a shift in market expectations regarding interest rates.
The rise in yields has led investors to recalibrate their expectations for Federal Reserve policy. The likelihood of an imminent rate cut has diminished, with only a 5% chance of a cut this month and a decreased probability for March.
Mark Newton, head of technical strategy at Fundstrat, predicts that yields will peak at 5% in early 2025. However, Tom Lee, also from Fundstrat, suggests that the current rise in yields may not necessarily indicate a long-term bearish trend for the market.
Economic data released today showed lower-than-expected private payroll growth, with ADP reporting 122,000 jobs added. Investors are now eagerly awaiting the December FOMC meeting minutes and the upcoming jobs report for further insights into the economic landscape.
As of market opened, major US stock indexes reflected the cautious sentiment. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all experienced slight declines.
In other market developments, tech giant Apple received a rare downgrade to “sell,” while Bitcoin, considered overbought by some analysts, may face a potential 13% sell-off. The cryptocurrency market saw significant movement, with Bitcoin dropping over 5%.
The commodities market showed mixed results, with West Texas Intermediate crude oil and Brent crude seeing slight increases. Gold prices rose, benefiting from the market uncertainty.
As traders navigate these complex market conditions, the interplay between potential policy changes, economic indicators, and market sentiment continues to shape the financial landscape. Investors remain vigilant, closely monitoring developments that could impact their portfolios in the coming days and weeks.
