Stocks fell for the second consecutive week as a round of fresh economic data stoked inflationary fears among investors.
The Standard & Poor’s 500 Index declined 1.94 percent, while the Nasdaq Composite Index dropped 2.34 percent. The Dow Jones Industrial Average lost 1.86 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, slipped 0.49 percent.1,2
Inflation Stymies Markets
Stocks rallied broadly to start the week, but two economic reports on Tuesday—job openings and the prices-paid index among service companies—raised fresh inflation concerns. Higher Treasury yields also put pressure on stocks.3,4
Stocks flattened out on Wednesday. Investors reacted to news that most Federal Open Market Committee members agreed inflation risks had increased, per minutes from the Fed’s December meeting.5,6
U.S. stock markets were closed Thursday in observance of President Jimmy Carter’s funeral.
On Friday, a warmer-than-expected December jobs report caused investors to question whether the Fed will adjust rates in 2025. News that consumer sentiment ticked down also pushed stocks lower.7
When Good Becomes Bad News
The economy added 256,000 jobs in December—100,000 more than economists expected. That’s the second-highest monthly job gain for 2024. Unemployment ticked down to 4.1 percent, which was also better than anticipated.
Job growth and lower unemployment signals good news for the economy but bad news for the markets. A stronger jobs market puts less pressure on the Fed to adjust rates, especially with inflation top-of-mind among investors.8,9
Footnotes and Sources
- The Wall Street Journal, January 10, 2025
- Investing.com, January 10, 2025
- CNBC.com, January 6, 2025
- The Wall Street Journal, January 7, 2025
- CNBC.com, January 8, 2025
- MarketWatch.com, January 8, 2025
- CNBC.com, January 10, 2025
- The Wall Street Journal, January 10, 2025
- TradingEconomics.com, January 10, 2025
