Wall Street opened lower on Wednesday from the day before amid ongoing inflation and interest rates concerns.
Why It Matters
Strong economic reports released Tuesday turned out to be bad for Wall Street.
One report said U.S. employers were advertising more job openings at the end of November 2023 than expected. Meanwhile, activity for finance, retail and other services businesses rose much faster last month than expected, according to another Tuesday report.
The downside to these reports is that such a solid economy could keep up pressure on inflation and could make the Federal Reserve less likely to make interest rate cuts.
Worries About Inflation And Interest Rates
Inflation has remained slightly above the Federal Reserve’s 2 percent target. The Institute for Supply Management’s Tuesday report on U.S. services industries said price increases accelerated last month.
Meanwhile, there are fears on Wall Street that there will be fewer interest rate cuts this year after the Fed cut them three times since September 2023. These fears have been building for weeks, sending longer-term Treasury bond yields higher. Investors who might otherwise buy stocks are more likely to invest in Treasury bonds when yields are higher.
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What To Know
The three major stock indexes, which measure stock performance, were either down or slightly up when Wall Street opened Wednesday,
The S&P 500 was drifting down by 0.1 percent in early trading and the Dow Jones Industrial Average dipped 115 points (or 0.3 percent) at 9:35 a.m. Eastern time. Meanwhile, the Nasdaq composite was only up by less than 0.1 percent.
What Have Wednesday’s Reports Shown?
One Wednesday report by private payroll company ADP said U.S. employers slowed their hiring last month by more than expected. Meanwhile, a Wednesday report from the Labor Department showed fewer U.S. workers applied for unemployment benefits last week than expected.
How Are The Treasury Bonds Performing?
The yield on the two-year Treasury was at 4.27 percent around 11 p.m. Eastern time, a less than 0.1 percent drop. Meanwhile, the yield on a 10-year Treasury remained at 4.69 percent.
What People Are Saying
Christopher Waller, a member of the Fed’s Board of Governors, said in a speech Wednesday in Paris that he still predicts the Fed to make more interest rate cuts this year, despite worries that the central bank may already be done easing rates.
He also said that he still expects inflation to trend downward over time, adding that he doesn’t see possible tariffs from President-elect Donald Trump to have a “significant or persistent effect” on inflation.
“If the outlook evolves as I have described here, I will support continuing to cut our policy rate in 2025,” he said. “The pace of those cuts will depend on how much progress we make on inflation, while keeping the labor market from weakening.”
What Happens Next
The stock market will be closed on Thursday in observance of a National Day of Mourning for former President Jimmy Carter who died at the age of 100 late last month.
Meanwhile, the jobs report for December will come out on Friday and it is sure to have an impact on Wall Street. This government report looks at the number of people on payrolls in the U.S., the average number of hours they worked weekly and their average hourly earnings. The jobs report also estimates the unemployment rate.
This article includes reporting from The Associated Press.
