Mixed Market Settlement as Economic Softness Takes Center Stage

US equity markets ended the trading session with divergent results on Tuesday, as investors grappled with conflicting signals from the nation’s economic data. The S&P 500 index completed the day down 0.24%, while the Dow Jones Industrials declined 0.62%. Meanwhile, the Nasdaq 100 managed a modest advance of 0.26%, buoyed by strength in technology names. Futures trading pointed to similar mixed positioning, with December E-mini S&P contracts falling 0.25% while December E-mini Nasdaq futures rose 0.25%.

Economic Headwinds Create Market Pressure

The primary source of downward pressure emanated from disappointing employment and consumer spending data. November’s unemployment rate ticked up to 4.6%, marking a 4-year peak, while October retail sales came in flat against expectations of a 0.1% gain. Manufacturing activity also showed weakness, with the December S&P manufacturing PMI declining to 51.8, a 5-month low that fell short of the 52.1 forecast. These readings reinforced concerns about economic momentum heading into year-end.

Adding to the headwinds was a sharp selloff in energy equities. WTI crude oil plummeted more than 2% to reach a 4.75-year low, triggering significant losses across the sector. Phillips 66 led the declines with a drop exceeding 6%, while Baker Hughes, APA Corp, Marathon Petroleum, and Halliburton all surrendered more than 3-4% of their value. The broader energy complex—including Occidental Petroleum, ConocoPhillips, Diamondback Energy, and Valero Energy—posted losses surpassing 3%.

Technology Stocks and Fed Expectations Provide Support

Despite economic softness, the Magnificent Seven technology cohort provided meaningful support to broader indices. Tesla surged more than 3%, with Meta Platforms advancing beyond 1%. Nvidia, Microsoft, Apple, and Amazon posted more modest gains, though Alphabet bucked the trend with a 0.54% decline. This tech strength allowed the Nasdaq 100 to settle into positive territory after flirting with a 3-week low.

Market participants also drew encouragement from select economic metrics that could support expectations for continued Federal Reserve accommodation. November nonfarm payrolls expanded by 64,000—above the 50,000 consensus—while wage growth moderated significantly. Average hourly earnings posted just 3.5% year-over-year growth, the smallest increase in 4.5 years and below the 3.6% forecast. This wage restraint, combined with falling inflation expectations, suggested the inflation backdrop may be easing. The 10-year Treasury note yield declined 2 basis points to 4.15%, reflecting this shift in sentiment.

Mixed Signals from Officials and Individual Movers

Atlanta Federal Reserve President Raphael Bostic struck a cautionary tone during Tuesday’s remarks, suggesting price stability remained a pressing concern despite recent labor market shifts. His comments suggested elevated inflation risks could persist into mid-to-late 2026, a hawkish perspective that tempered some optimism about near-term rate cuts.

Among individual stocks, notable movers included Booz Allen Hamilton, which fell more than 7% after announcing its CFO would resign effective February 1. Humana dropped more than 6% following full-year guidance below consensus expectations. Comcast, meanwhile, led the S&P 500 gainers with a jump exceeding 5% amid speculation about activist investor involvement. Cognex also surged more than 5% following a Goldman Sachs upgrade, while Estee Lauder and Robinhood Markets each gained more than 3%.

International Weakness and Bond Market Developments

Overseas equity markets struggled on Wednesday, with Europe’s Euro Stoxx 50 sliding 0.60%. Asian weakness intensified, as China’s Shanghai Composite fell to a 2-month low, closing down 1.11%, while Japan’s Nikkei Stock 225 sank to a 2-week low with a 1.56% decline.

Treasury markets continued to reflect evolving rate expectations. The March 10-year T-note contract closed up 7.5 ticks, while the 10-year yield settled at 4.145%. European government bonds displayed mixed performance, with German 10-year bund yields falling 0.8 basis points to 2.845%, though UK 10-year gilts rose 2.3 basis points to 4.518%. The Eurozone manufacturing sector showed unexpected contraction at 49.2, representing the steepest pace of decline in 8 months.

Week Ahead Focus

Market participants are positioning for a data-heavy week ahead. Thursday brings weekly initial unemployment claims, expected to fall by 11,000 to 225,000, alongside November consumer price data. Friday features existing home sales and the University of Michigan consumer sentiment index, both critical reads on consumer health and housing dynamics.

Current derivatives pricing suggests just a 24% probability that the Federal Reserve will reduce the fed funds target range by 25 basis points when the FOMC convenes on January 27-28, reflecting continued uncertainty about the inflation trajectory and appropriate policy stance.