New York Stock Market Shows Mixed Early Trading Amid Inflation Concerns... 10-Year Treasury Yield Threatens 4.7%

Service Sector PMI 54.1 'Exceeds Expectations'
Service Sector Price Index Highest in 2 Years... Inflation Concerns
Widespread Forecast for Interest Rate Freeze in H1... Government Bond Yields Rise

The three major indices of the U.S. New York stock market showed mixed trends in the early session on the 7th (local time). The initial gains were given up shortly after the opening as expectations grew that the Federal Reserve (Fed) would keep interest rates unchanged in the first half of the year due to strong service sector performance and inflation concerns. Treasury yields also surged, with the 10-year yield threatening 4.7%.

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As of 11:02 a.m. in the New York stock market, the Dow Jones Industrial Average, centered on blue-chip stocks, was up 0.19% from the previous day at 42,788.35. The large-cap-focused S&P 500 index was down 0.35% at 5,954.49, and the tech-heavy Nasdaq index was trading 1.08% lower at 19,650.96.

Improvement in the service sector indicators led to the surrender of gains in the New York stock market this morning. According to the Institute for Supply Management (ISM), the service sector Purchasing Managers' Index (PMI) for December last year was 54.1, exceeding both the previous month’s figure (52.1) and expert forecasts (53.5). A reading above 50 indicates expansion, while below 50 indicates contraction, confirming an acceleration in the service sector’s expansion. The service sector price index, a sub-index of the service PMI, rose from 58.2 in November to 64.4 in December. This not only exceeded market expectations (57.5) but also marked the highest level since early 2023, heightening inflation concerns.

Following the release of the service sector data, Treasury yields rose amid growing expectations that the Fed will keep rates unchanged in the first half of the year. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 6 basis points (1bp=0.01 percentage points) from the previous day to 4.68%, while the 2-year Treasury yield, sensitive to monetary policy, increased 4 basis points to 4.31%.

The market is almost certain that rates will be held steady this month. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market currently prices in a 93.1% probability that the Fed will keep rates unchanged at the Federal Open Market Committee (FOMC) meeting scheduled for January 28-29. The likelihood of maintaining current rates through March and May stands at approximately 60% and 50%, respectively, while the probability of holding rates steady through June exceeds 30%.

This week, market attention is focused on the opening of the world’s largest consumer electronics and IT exhibition, CES 2025, and the U.S. Labor Department’s employment report for December, to be released on the 10th. The market estimates that nonfarm payrolls increased by 154,000 in December, down from 227,000 in the previous month. The unemployment rate is expected to remain steady at 4.2%. If nonfarm payrolls exceed market expectations, the likelihood of the Fed maintaining rates increases; however, if the figure falls significantly short, concerns about economic slowdown may rise, weighing on the stock market.

By individual stocks, Nvidia is down 5.19%. Despite surging 3.43% and hitting an all-time high the previous day on the back of strong earnings from its partner Foxconn, it has given up all gains within a day. Jensen Huang, Nvidia’s CEO, announced the company’s entry into autonomous vehicles and robotics during his keynote speech at CES 2025. Electric vehicle maker Tesla is down 2.98% after Bank of America (BoA) downgraded its investment rating citing overvaluation and strategic risks.

International oil prices are rising. West Texas Intermediate (WTI) crude oil is trading at $74.22 per barrel, up $0.66 (0.9%) from the previous day, while Brent crude, the global oil price benchmark, is up $0.73 (0.96%) at $77.03 per barrel.