Stocks Settle Lower on Tech Weakness and Higher Bond Yields

The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -0.74%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.63%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.84%.  March E-mini S&P futures (ESH26) fell -0.71%, and March E-mini Nasdaq futures (NQH26) fell -0.89%.

Stock indexes retreated on Wednesday, with the S&P 500, the Dow Jones Industrial Average, and the Nasdaq 100 sliding to 1.5-week lows.  The weakness in chip stocks and data storage companies led the broader market lower on the last trading day of the year. Also, mining stocks slid on Wednesday, with gold prices falling to a 2.5-week low and silver prices plunging more than -9%.  In addition, higher bond yields are negative for stocks, as the 10-year T-note yield climbed +4 bp to 4.16% after weekly jobless claims unexpectedly fell to a 1-month low, a hawkish factor for Fed policy.

Trading activity was subdued on Wednesday, with volumes well below normal, as markets in Germany and Japan were closed for the New Year's holiday. 

US weekly initial unemployment claims unexpectedly fell -16,000 to a 1-month low of 199,000, showing a stronger labor market than expectations of an increase to 218,000.

Wednesday's better-than-expected Chinese economic news is supportive of global growth prospects.  The China Dec manufacturing PMI rose +0.9 to 50.1, stronger than expectations of no change at 49.2 and the fastest pace of expansion in 9 months.  Also, the Dec non-manufacturing PMI rose +0.7 to 50.2, stronger than expectations of 49.6.

Seasonal factors are bullish for stocks.  According to data from Citadel Securities, since 1928, the S&P 500 has risen 75% of the time in the last two weeks of December, climbing 1.3% on average.

Market attention this holiday-shortened week will focus on US economic news.  On Friday, the Dec S&P manufacturing PMI is expected to remain unrevised at 51.8. 

The markets are discounting the odds at 15% for a -25 bp rate cut at the FOMC's next meeting on January 27-28.

Overseas stock markets settled mixed on Wednesday.  The Euro Stoxx 50 closed down -0.08%.  China's Shanghai Composite closed up +0.09%.  Japan's Nikkei Stock 225 is closed for a bank holiday.

Interest Rates

March 10-year T-notes (ZNH6) on Wednesday closed down -6.5 ticks.  The 10-year T-note yield rose +3.3 bp to 4.155%.  Mar T-notes gave up an early advance on Wednesday and turned lower after US weekly jobless claims unexpectedly fell to a 1-month low, a sign of labor market strength that is hawkish for Fed policy.  The weakness in stocks on Wednesday boosted some safe-haven demand for government debt and limited losses in T-notes. 

European government bond yields moved lower on Wednesday.  The 10-year German bund yield is not trading today, with German markets closed for the New Year's holiday.  The 10-year UK gilt yield fell -1.9 bp to 4.479%.

Swaps are discounting a 1% chance of a +25 bp rate hike by the ECB at its next policy meeting on February 5.

US Stock Movers

Chip makers and data storage companies were under pressure on Wednesday, leading the overall market lower.  Micron Technology (MU), KLA Corp (KLAC), and Western Digital (WDC) closed down more than -2%.  Also, Marvell Technology (MRVL), Seagate Technology Holdings (STX), Lam Research (LRCX), Microchip Technology (MCHP), Applied Materials (AMAT), Qualcomm (QCOM), and ARM Holdings Plc (ARM) closed down more than -1%. 

The Magnificent Seven stocks settled lower, weighing on the broader market.  Tesla (TSLA) closed down -1.04%, Meta Platforms (META) closed down -0.88%, Microsoft (MSFT) closed down -0.79%, Amazon.com (AMZN) closed down -0.74%, Nvidia (NVDA) closed down -0.55%, (AAPL) closed down -0.38%, and Alphabet (GOOGL) closed down -0.27%. 

Mining companies retreated on Wednesday after gold prices fell to a 2.5-week low and silver prices plunged more than -9%.  Newmont (NEM), Barrick Mining (B), Freeport-McMoRan (FCX), Coeur Mining (CDE), and Hecla Mining (HL) closed down more than -1%. 

Corcept Therapeutics (CORT) closed down by more than -49% after the FDA rejected the company's relacorliant drug as a treatment for patients with hypertension secondary to hypercortisolism, saying it could not reach a favorable benefit-risk assessment without additional effectiveness data.

GlobalFoundries (GFS) closed down more than -3% after Wedbush downgraded the stock to neutral from outperform. 

Vanda Pharmaceuticals (VNDA) closed up more than +25% after the FDA approved the company's Nereus drug for the prevention of vomiting induced by motion. 

Nike (NKE) closed up more than +4% to lead gainers in the S&P 500 and Dow Jones Industrials on signs of insider buying after an SEC filing showed CEO Hill purchased about $1 million worth of shares on Monday.

Terawulf Inc (WULF) closed up more than +3% after Keefe, Bruyette & Woods upgraded the stock to outperform from market perform with a price target of $24. 

Earnings Reports(1/2/2026)

Lifecore Biomedical (LFCR).