Nasdaq and S&P 500 fall amid hopes of rate cuts in 2025

The technology sector led U.S. stocks lower on Monday, while the dollar and bond yields rose as interest rate cut hopes faded ahead of this week’s key consumer inflation report.

The S&P 500 (^GSPC) fell 0.8%, while the Nasdaq Composite (^IXIC) fell about 1.6%. But the Dow Jones Industrial Average (^DJI), which includes fewer technology stocks, hovered along the flat line.

After Friday’s crash, which wiped out all previous annual gains for Wall Street’s most important stock market instruments, the stock markets are facing tough times again. A hot jobs report in December rattled markets and raised fears that signs of a strong economy will prompt the Federal Reserve to keep interest rates higher for longer.

The 10-year Treasury yield (^TNX) extended recent gains to hit a 14-month high, trading not far from 4.8% as U.S. bonds sold off. Meanwhile, the dollar (DX-Y.NYB) rose to a two-year high against its major currency partners, with the British pound (GBPUSD=X) in particular coming under pressure.

As of Monday, traders are betting that there will be no rate cut until at least September and that the Fed will cut borrowing costs by just 30 basis points in all of 2025, according to the CME FedWatch tool.

That has heightened attention on the December consumer price index due on Wednesday, as a major market concern is that inflation will not cool to the central bank’s 2 percent target.

Adding to the gloom, oil prices rose to their highest in five months before paring gains after the U.S. imposed tougher sanctions on the Russian crude industry, threatening supplies to China and India. Brent (BZ=F) briefly rose more than 2% to trade above $81 a barrel, while West Texas Intermediate (CL=F) changed hands at around $78.

Shares of Nvidia (NVDA), Apple (AAPL) and Tesla (TSLA) fell as all the “Magnificent Seven” tech megacaps lost ground in the market turmoil. Europe’s largest pension fund announced it had sold all of its shares in Tesla, despite CEO Elon Musk receiving a pay package.

In the corporate sector, shares of Moderna (MRNA) plunged over 22% after the biotech giant cut its 2025 revenue forecast by $1 billion due to weak demand for vaccines.

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