US stocks have dropped, with the benchmark S&P 500 at a two-month low as bond yields surged after robust payroll numbers last week, boosting expectations that the Federal Reserve will maintain a hawkish stance for most of this year.
In early trading on Monday, the Dow Jones Industrial Average rose 105.06 points, or 0.25 per cent, to 42,043.51, the S&P 500 lost 40.79 points, or 0.70 per cent, to 5,786.25, and the Nasdaq Composite lost 274.13 points, or 1.43 per cent, to 18,887.50.
Wall Street’s fear gauge rose 1.60 points to hit a more than three-week high.
The domestically sensitive Russell 2000 index declined 1.0 per cent to its lowest since September 2024, extending Friday’s decline, which left it entering correction territory after falling more than 10 per cent from its November intraday record high.
Pressuring stocks, yields on longer-dated US Treasury bonds are pinned at multi-month highs.
At one point, traders were no longer fully pricing in even one Fed rate cut this year, according to data compiled by LSEG, from about 43 basis points before Friday’s job figures.
Bets currently reflect expectations of a 27 bps easing by the Fed’s December meeting.
“In the early stages of recalibrating monetary policy, investors tend to take a bit of a risk-off attitude,” said Art Hogan, chief market strategist at B Riley Wealth.
“But the important part of what has changed thus far this year is that economic data being positive at the end of the day will likely be a net positive for corporate earnings and for markets.”
Five of the 11 S&P 500 sectors declined, led by a 1.8 per cent drop in Technology stocks.
Megacaps were down, with Tesla sliding 2.0 per cent, Apple dropping 2.7 per cent and Alphabet losing 1.5 per cent.
The main indexes logged their second consecutive week of declines in the previous session after multiple reports pointed to better-than-expected economic activity, raising worries that inflation could be running high.
Investors also priced in the likelihood that the incoming Donald Trump administration’s policies – such as tariffs and a clampdown on illegal immigration – could threaten global trade and fuel price pressures when the Fed has also signalled a cloudy monetary policy outlook.
Trump is set to take office on January 20.
The Consumer Price Index numbers and the central bank’s Beige Book on economic activity, both due on Wednesday, could help investors gauge the Fed’s policy outlook.
Chip stocks such as Nvidia dropped 3.3 per cent and Advanced Micro Devices fell 1.0 per cent after the US government said it would further restrict artificial-intelligence chip and technology exports.
Moderna slid 22 per cent to the bottom of the S&P 500 after cutting its 2025 sales forecast by $US1 billion ($A1.6 billion).
Dow component UnitedHealth Group added 3.6 per cent, CVS Health rose 4.1 per cent and Humana climbed 5.9 per cent after the US government proposed 2026 reimbursement rates for Medicare Advantage plans run by private insurers, which will result in a 2.2 per cent increase in payments.
Major lenders JPMorgan Chase & Co and Wells Fargo are due to report results on Wednesday.
Declining issues outnumbered advancers by a 1.96-to-1 ratio on the NYSE, and by a 2.57-to-1 ratio on the Nasdaq.
The S&P 500 posted one new 52-week high and 22 new lows while the Nasdaq Composite recorded 11 new highs and 149 new lows.
