Stocks Struggle for Direction as Traders Eye Rate Cut Prospects
(Bloomberg) — The stock market faced a difficult start to the year, with the S&P 500 and Nasdaq 100 both struggling to maintain their upward momentum. Following a set of lackluster jobs and US service sector data, traders are grappling with the prospects of a potential rate cut in March.
This week has shaped up to be the stock market’s worst since late October, with the S&P 500 on track to break its nine-week bull run. The Nasdaq 100 is also facing challenges, grappling with a six-day losing streak.
The downbeat tone in the market has some experts concerned about rough waters ahead for equities in the first half of the year. Tom Lee, from Fundstrat Global Advisors LLC, noted that the first four trading days of the year have been “a terrible start for equities,” suggesting a potentially challenging year ahead.
While the jobs data and US service sector numbers have added to the pessimistic outlook, some experts remain optimistic, with expectations of a rally in the latter half of the year.
Richmond Fed President Thomas Barkin indicated that the labor market was in a pattern of steady softening, adding to the market’s uncertainty.
Treasury yields fluctuated in Friday’s choppy session, with the 10-year yield hitting 4.05%. The bond market was whipsawed after data showed a larger-than-expected gain in nonfarm payrolls and a steady unemployment rate in December, challenging wagers on potential rate cuts from the Federal Reserve.
However, experts on Wall Street continued to hold faith in the central bank’s ability to navigate the economy.
The better-than-expected jobs report has afforded the Fed flexibility to delay cutting rates early in 2024, according to experts at BMO Capital.
Despite the uncertainty, some deal talks and corporate news brought some activity to the markets, with Tesla Inc. announcing a recall of more than 1.6 million cars in China, and reports of potential mergers in the engineering and energy sectors.
The broader market remains uncertain, with investors keeping a close eye on upcoming inflation figures and earnings reports from big banks.
The dollar weakened after the December reports, while oil prices climbed, driven by geopolitical tensions in the Middle East and North Africa.
As markets continue to fluctuate, analysts stress the importance of maintaining vigilance and carefully navigating the potential impact of external factors on the financial environment.
This news was produced with the assistance of Bloomberg Automation.
–With assistance from Alex Nicholson, Edward Bolingbroke, Allegra Catelli, Cecile Gutscher, and Sujata Rao.
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