Wall Street poorly digested the (too) good ISM ‘services’ figure, and the resulting surge in rates.
The yield on T-Bonds reached and then exceeded the peaks at the end of April 2024, the ’30 year’ now displays more than 4.90%, or almost 4 times the yield on S&P500 stocks (1.25%): is the most spectacular yield gap in 23 years… and it has always resulted in major corrections over the last 100 years.
The Dow Jones lost only -0.4% on Tuesday, the losses were heavier for the S&P500 (-1.1%) and the Nasdaq index fell by -1.9% in the wake of Nvidia (-6.2%) which is reversing course after smashing a new historic record the day before and pulling the entire ‘tech’ sector upwards.
Another notable decline is that of Tesla (-4% following an investigation into security flaws in autonomous driving), Broadcom (-3.3%) and Facebook (-2%) as Mark Zuckerberg announces the end of ‘fact checking’.
During an intervention where he explains this, his description of ‘fact checking’ at Meta is more akin to a form of censorship and promotion of certain official truths – he mentions a ‘strong political bias’ -, at the request of the Biden administration.
The boss of Meta undertakes to promote ‘more freedom of speech’, which confirms that it was deliberately restricted – under the pretext of ‘moderation’ -, in violation of the 1st amendment.
Investors may be more cautious after the publication of ‘vigorous’ activity figures, while Wall Street will be closed on January 9 (commemoration day in honor of Jimmy Carter, who died at the age of 100).
This session will remain marked by a surge in long rates: +8 Points on the ’10 year’ towards 4.696%, +7.5 Points on the ’30 year’ at 4.914%.
Yields soared at 4 p.m., as soon as the US ISM ‘services’ was published: it rose to 54.1 compared to 52.1 the previous month, while economists on average expected a figure of 53, 5.
The sub-index measuring activity in the tertiary sector rose to 58.2 from 53.7 in November, while that of new contracts improved to 54.2 from 53.7 the previous month.
The prices paid component is up sharply – from 58.2 to 64.4, while that concerning employment has fallen to 51.4 against 51.5 in November.
An hour and a half earlier, investors had learned of the United States trade deficit: it increased to 78.2 billion dollars in November, compared to that of 73.6 billion the previous month (which was slightly revised from an initial estimate of 73.8 billion), according to the Commerce Department.
This 6.2% increase in the deficit from one month to the next results from a 3.4% increase in American imports of goods and services, to 351.6 billion dollars, therefore surpassing an increase of 2. 7% of exports, at 273.4 billion.
This evening, investors in US ‘treasuries’ no longer seem to be expecting the slightest rate cut by the FED before next July (just before the summer break and the Jackson Hole meeting).
Copyright (c) 2025 CercleFinance.com. All rights reserved.
