S&P 500, Dow, Nasdaq fall as traders pare rate cut bets after new economic data

Prices paid in the services sector during December shot higher, casting concern over the path forward for inflation.

Data from the Institute of Supply Chain Management showed the prices paid index jumped to a reading of 64.4 in December, up from a prior reading of 58.2 the month prior. Broadly activity in the sector also increased with the ISM services index increasing to a reading of 54.1 in December from 53.5 in November.

“The surge in the prices paid index to a nearly two-year high of 64.4, from 58.2, is a worry for the Fed as it is consistent with PCE supercore inflation remaining at 3.5% until the middle of next year,” Capital Economics North America economist Thomas Ryan wrote in a note to clients on Tuesday. “This serves as a good reminder that the Fed’s fight against inflation is not over, particularly going into a year where tariffs and immigration curbs are set to reignite price pressures.”

The ten-year Treasury yield (^TNX) quickly moved higher after the release, adding roughly 7 basis points to hover just below 4.7%. And bets on when the Federal Reserve will next cut interest rates were pushed back, too.

Traders now don’t see a more than 50% chance the Fed cuts rates until the central bank’s June meeting, per the CME FedWatch Tool. Yesterday, traders saw a roughly 55% chance the Fed will have cut interest rates by at least 25 basis points following the end of its May meeting.

Markets sold-off as rates chugged higher. The Nasdaq Composite (^IXIC), which opened the day in the green, was down about 1%. Meanwhile, the S&P 500 (^GSPC), which had also positive earlier in the session, fell about 0.4%

Job openings rose more than expected in November as investors continue to dissect the pace of the labor market slowdown amid questions over how much further the Federal Reserve will slash interest rates this year.

New data from the Bureau of Labor Statistics released Tuesday showed that 8.1 million jobs were open at the end of November, an increase from the 7.84 million in October.

The October figure was revised higher from the 7.74 million open jobs initially reported. Economists surveyed by Bloomberg had expected Tuesday’s report to show 7.74 million openings in November

The Job Openings and Labor Turnover Survey (JOLTS) also showed 5.27 million hires were made during the month, down from the 5.39 million made during October. The hiring rate fell to 3.3% from 3.4% in October. Also in Tuesday’s report, the quits rate, a sign of confidence among workers, fell to 1.9% from 2.1% in October. Total quits decreased to 3.07 million from 3.28 million in October.

US stocks edged higher on Tuesday, with Nvidia (NVDA) once again lifting market sentiment.

The benchmark S&P 500 (^GSPC) inched up 0.3%, holding near tech-fueled prior-session gains. The Dow Jones Industrial Average (^DJI) also rose 0.3%, while those on the tech-heavy Nasdaq Composite (^IXIC) added around 0.2%.

Nvidia (NVDA) stock rose as much as 2.5% in premarket trading following CEO Jensen Huang’s keynote at the tech industry’s annual CES trade show in Las Vegas late Monday.

Huang’s presentation gave a flurry of updates on upcoming Nvidia products that preview what’s next in the burgeoning artificial intelligence market and other emerging technologies.

Nvidia shares closed at a record high of $149.43 Monday ahead of Huang’s keynote — eclipsing its prior record close of $148.88 reached back on Nov. 7.

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